TaxTMI 
TaxTMI 
2018 (10) TMI 586
X X X X Extracts X X X X
X X X X Extracts X X X X
....uced as under : Grounds of Appeal by Assessee S.No. Assessee ITA.No. Development Rights Disallowance of Expenses Deemed Dividend 1. Saamag Developmers Pvt. Ltd., 2053/D/2017 62,59,639 2,30,88,128 47,08,000 2. Saamag Construction Ltd. 2054/D/2017 3,04,89,086 3,84,61,268 91,67,650 3. Saamag Infrasctucture Ltd., 2055/D/2017 4,68,48,831 2,14,49,458 --- 4. Saga Developers Pvt. Ltd., 2056/D/2017 --- 2,25,66,035 --- 5. Pyramid Realtors Pvt. Ltd., 2057/D/2017 --- 2,26,62,796 5,00,000 2.1. For the purpose of disposal of appeals, we decide ITA.No.2053/Del./2017 as under. ITA.No.2053/Del./2017 - M/s. Saamag Developers Pvt. Ltd., : 3. The brief facts of the case as culled from the assessment order is that the assessee-company is engaged in the business of real estate development i.e. acquisition of land, development thereof, construction of residential apartments, commercial complexes etc. The assessee filed its return of income on 26.03.2012 declaring an income of Rs. 1,45,27,554/- which was processed under section 143(1) of the IT Act, 1961. The case of the assess....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n which the assessee explained that assessee is part of Saamag Group of companies, the other constituents of the group are as under: a) Saamag Construction Ltd., b) Saamag Infrastructure Ltd., c) Saga Developers Pvt. Ltd., d) Pyramid Realtors Pvt. Ltd., 6.1. All these entities including the assessee-company ventured into the business of Real Estate Development since inception. More particularly during the A.Y. 2008-2009, the Saamag Group embarked upon development of a residential project in Village-Bamhetta, District-Ghaziabad, U.P. The details of the same were filed to show that joint venture entity had to develop a residential project in about 75.09 acres of land. During Assessment Year 2008-09, 46.67 acres of land was acquired and was in the possession of the Saamag Group. The development rights in respect of such lands of 46.67 acres were transferred and appropriate consideration was received. Since there was still further land to be acquired, the process of acquisition of land by the Saamag Group of companies continued in the subsequent years also. During the assessment year, the assessee-company had transferred development rights of land....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... Ltd. It is, therefore, clear that a simplicitor transfer of development rights in land and receipt of consideration would not give rise to accrual or arising of income within the meaning of Section 5 of the Income Tax Act. The assessee relied upon decision of Hon'ble Supreme Court in the case of CIT vs. A. Gajapathy Naidu, 53 ITR 114 (SC) in which the Hon'ble Supreme Court held that "When the ITO proceeds to include a particular income in the assessment, he should ask himself inter alia, two questions namely (i) What is the system of accounting adopted by the assessee and (ii) if it is mercantile system of accounting, subject to the deemed provision, when has the right to receive accrued. If comes to the conclusion that such a right accrued or arise to the assessee in a particular accounting year, he shall include the said amount in the assessment of the succeeding assessment year". It was further held that "It would not be proper to extend the meaning of the word "accrue or arise" in Section 4 of the I.T. Act to take any amount received by the assessee in a later year though the receipt was not on the basis of right accrued in earlier year". 6.2. The assessee-company, therefo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r 2012-13 and accordingly the assessee-company has admitted the corresponding development rights consideration as income. The details of the approval received is filed. The assessee-company relied upon the Order of the ITAT, Delhi Bench in the case of ITO vs. M/s Finian Estates Developers Pvt. Ltd., in which it was held that "unless the necessary approval for development is received from the regulatory authority, the consideration arising from transfer of development rights attached to the land will not accrue to the assessee. It is a contingent right only and will become a legal right to receive and enjoy the income only when the necessary approval is received". As per shareholders agreement dated 18.05.2007 that the assessee-company and the other Companies of the Saamag Group have a heavy legal burden and responsibility of delivering to the Consortium the agreed FSI and the agreed area of land. As per the same agreement there are heavy financial burden on the assessee-company when it is unable to deliver duly approved (by GDA) specified FSI of 34,94,371 sq. ft. 6.3. The Ld. CIT(A) considering the findings of the A.O, submissions of the assessee-company and material on record a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....A.No.3618/Del./2014 etc., vide Order dated 12.01.2018 and similar addition have been deleted. The issue is, therefore, covered in favour of the assessee. The amount is taxable when approval is granted by GDA. It is offered for taxation in A.Y. 2010-2011 in a sum of Rs. 3,89,29,660/-(PB-182), Rs. 3,78,11,266/- in A.Y. 2013-2014 (PB-189) and Rs. 1,61,44,227 in A.Y. 2014-2015 (PB-207). PB-134 is the details of land acquired through the same agreement in 1314 acres. PB-130 is Development Rights Agreement Dated 25.03.2010 between the assessee-company and M/s. Saamag Realtors Private Limited which relate to land acquired by assessee-company. It is also an un-registered agreement. The Tribunal has considered the identical issue in A.Y. 2008-2009. Therefore, no addition could be made against the assessee and the amounts in question is not taxable during the assessment year under appeal. 8. On the other hand, Ld. D.R. though relied upon the Orders of the authorities below, but stated that issue may be covered by the Order of the Tribunal as above. 9. We have considered the submissions of the parties and gone through the material on record. The Ld. CIT(A) following the Order for A.Y. 2....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rties which requires to complete the land for integrated township, i.e. 72.9 acres. Keeping in view the consideration the huge finances required for the development of the integrated township, the consortium parties entered into a shareholders' agreement with a financial partner M/s SARE [Cyprus] SPV3 Ltd. on 18th May 2007. 10.5 Under the shareholders agreement, one of the group companies, M/s Saamag Realtors Pvt. Ltd., was a confirming party to the shareholders agreement, which also holds 10.39 acres of land and made SPV for the purpose. As per agreement, after signing the same the name of SPV would have to be changed to 'SARE SAAMAG REALTY PVT. LTD'. The other parties of the Saamag group hold 36.2246 acres of land on the date of the agreement. 10.6 The salient features of the relevant clauses of the shareholders' agreement are reproduced as under:- Clause 2.5 The loan facility of Rs. 25 crores granted by Punjab National Bank and Indian Overseas Bank, on mortgage of land, be transferred in favour of SPV and also performance guarantee of Rs. 4,75,00,000/- provided by GDA. 2.6 In case Saamag fails to obtain permission to transfer....
X X X X Extracts X X X X
X X X X Extracts X X X X
....jective. In such case, Saamag shall be liable to pay to SARE a penalty amounting to 10% of the extra equity infused by SARE in the SPV. 3.1.11 In the event, Saamag is not able to obtain any statutory approval, permission, sanction including but not limited to completion certificate or approval of building plan due to failure to acquire land or otherwise and such failure on the part of SCL results in a loss to the SPV. M/s Saamag shall be liable to compensate SPV and SARE. 4.2.2 The capital contribution of the Saamag towards the capital of SPV shall remain in lock in period till the Saamag has undertaken all the statutory and other compliances and obtained all the necessary approvals, sanctions, permissions etc. from the appropriate Government authorities required by the SPV to undertake the development and construction of the project and final sale of units. Clause 8.2 - Responsibilities and Obligations of Saamag: 8.2.1 Saamag agrees and undertakes that the execution of the project by SPV is the responsibility and obligation of Saamag and such responsibility and obligation includes but is not limited to those stated in this agreement and Saamag s....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 8.2.21 The SCL hereby undertakes to indemnify and keep the SPV and its affiliates and officers, directors, employees, agents and advisors harmless from and against any losses, damages, liabilities, suits, proceedings, actions, costs or expenses (including reasonable attorney's fees and other dispute resolution costs) that may be incurred, suffered or instituted (a) as a result of noncompliance with or breach of the undertakings and representations made by the SCL in this agreement, (b) as a result of any act of omission or commission or negligence in contravention of this agreement by SCL, and/or on the part of its officers, directors, employees and agents, (c) as a consequence of the third party claims against or legal dues or any nature on SCL in connection with the subject matter of this agreement, or (d) infringement of intellectual property of SPV caused by SCL. 10.7 The aforesaid shareholders agreement was the main agreement and after that, further agreements were also made between the parties as and when the appellants acquired the land and such agreements in the year under consideration were dated 29th September 2007 and 19th October 2007. Whatever the sa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hat the nomenclature and description given to a contract is not determinative of the real nature of the document or of the transaction thereof. These have to be determined from overall terms of the documents and all the rights and liabilities as well as results flowing therefrom and not by picking and choosing certain clauses as done by the AO. He further stated that in order to ascertain the true nature and meaning of several clauses of the contract, the words of each clause must be so interpreted as to bring them into harmony with the other clauses of the contract and not with reference to only of few terms or with just one of the rights flowing therefrom as held by the Supreme Court in the case of State of Orissa vs. Titagarh Paper Mills Co. Ltd. in [1985] 60 STC 213. Mr. Rastogi stated that the Hon'ble Supreme Court in the case of Titagarh Paper Mills (supra) observed that a chameleon may change it colour according to its surrounding, but a document is not a chameleon to change its meaning according to purpose of the statute with reference to which it falls to be interpreted. 10.10.1 Ld. Counsel of the assesee further stated that in the instant case, the AO has not con....
X X X X Extracts X X X X
X X X X Extracts X X X X
....yes of law for the purpose of section 53A of the Transfer of Property Act. 10.10.4 Ld. Counsel of the assessee stated that such provisions of the law have been judicially noticed and considered by the Supreme Court in the case of CIT vs. Balbir Singh Maini in 398 ITR 531. In the case of Balbir Singh Maini, the Hon'ble Supreme Court, while construing the provision of section 2(47)(v) of the IT Act with reference to the effect of section 17(1A) of the Registration Act which was inserted by the Amendment Act of 2001 which made compulsory the registration of the documents contemplated u/s 53A of the Transfer of Property Act and held that after the commencement of Amendment Act, 2001, in the absence of registration of such documents with the Registration Authorities, these documents cannot be considered to be a document of the nature referred to in section 53A of the Transfer of Property Act and in such situation the allowing of any possession to the transferee is immaterial. 10.10.5 Ld. Counsel of the assessee pointed out that the provision of section 2(47)(v) of the IT Act has been brought to the Statute Book by the Finance Act, 1987 with effect from 1st April 1988 a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the appellant cannot state that it is not registered agreement. Mr. Rana further stated that in the case of CIT vs. Dr. T.K. Dayalu in 202 Taxman 531, the Karnataka High Court and also the Bombay High Court in the case of Chaturbhuj Dwarka Dass Kapadia vs. CIT in 260 ITR 491, it has been held by the Courts that in the case of joint development agreements, if the assessee has given the possession and has received a non-refundable advance, then it amounts to transfer u/s 2(47)(v) of the Act and tax has to be levied in the year in which such agreement has been made and accordingly the AO has correctly levied the tax in the Assessment Year 2008-09 wherein the shareholders agreement has been made. 10.13 However, in rejoinder Ld. Counsel of the Assessee stated that as far as the surrender alleged to have been made during the course of search, it was made under pressure and under some ignorance and misconception of law and that is why later on the assessee had retracted from the same looking into the legal positions, which came to his notice about the year of accruality of income on transfer of development rights and land. Ld. Counsel of the assessee also stated that even the AO ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Act does not require any registration and if the possession of the property has been handed over under a transaction, then it would amount to transfer for the purpose of levy of tax. But after the amendment to the Registration Act, 1908 by way of Amendment Act, 2001, a provision of section 17(1A) has been introduced. Section 17(1A) of the Registration Act states that such agreement wherein the possession of the immovable property is already given, then such agreement is required to be compulsorily registered and if such documents are not registered on or after commencement of the Amendment Act, 2001, then they shall have no legal effect for the purpose of the said section 53A of the Transfer of Property Act. The Hon'ble Supreme Court, after considering the provision of section 2(47)(v) of the IT Act read with section 53A of the Transfer of Property Act and section 17(1A) of the Registration Act at pages 548-549 observed as under: "20. The effect of the aforesaid amendment is that, on and after the commencement of the Amendment Act of 2001, if an agreement, like the JDA in the present case, is not registered, then it shall have no effect in law for the purposes of Section ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....iew that sub-clause (v) of Section 2(47) of the Act is not attracted on the facts of this case, we need not go into any other factual question." 11.2 We note that in the present case, the very shareholders agreement dated 18th May 2007 is admittedly not registered u/s 17(1A) of the Registration Act, 1908 which is the condition precedent to give effect to the provision of section 53A of the Transfer of Property Act. The Department has also not brought any evidence contrary to the fact. The registration with GDA is not the registration as contemplated u/s 17(1A) of the Registration Act, 1908. Therefore, in view of the above facts and the law as laid down by the Hon'ble Supreme Court, the provisions of section 2(47)(v) of the IT Act are not applicable to the transactions embodied in the shareholders agreement dated 18th May 2007 as well other agreements dated 29th September 2007 and 19th October 2007 because all agreements are unregistered agreements and accordingly no liability of tax can be fastened on the appellant merely on the basis that the possession of the land has been handed over by the appellant. Under the law, the appellant continues to be the owner of the land an....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e Tax Act takes into account two points of time at which the liability to tax is attracted, viz., the accrual of the income or its receipt; but the substance of the matter is the income. If income does not result at all, there cannot be a tax, even though in bookkeeping, an entry is made about a 'hypothetical income', which does not materialise. Where income has, in fact, been received and is subsequently given up in such circumstances that it remains the income of the recipient, even though given up, the tax may be payable. Where, however, the income can be said not to have resulted at all, there is obviously neither accrual nor receipt of income, even though an entry to that effect might, in certain circumstances, have been made in the books of account." The above passage was cited with approval in Morvi Industries Ltd. v. CIT [Morvi Industries Ltd. v. CIT, (1972) 4 SCC 451 : 1974 SCC (Tax) 140 : (1971) 82 ITR 835] in which this Court also considered the dictionary meaning of the word "accrue" and held that income can be said to accrue when it becomes due. It was then observed that: (page 340) ". ... the date of payment ... does not affect the accrual of....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... this way, unless and until the approvals and permissions are granted by GDA, it cannot be said that any income accrued to the appellants. 11.8 It was brought to our notice that such approvals have been granted by GDA in subsequent years and that too in piecemeal manner. As and when GDA had granted the approvals, the appellants have appropriated the proportionate amount out of the advance so received under the shareholders agreement and offered the same for tax. The assesses counsel pointed out that such offer had been made in Assessment Years 2010-11, 2013-14 and 2014-15. The assessments for the Assessment Years 2013-14 and 2014-15 have been made under scrutiny assessment and the Department has also accepted the same. 11.9 Keeping in view of the facts and circumstances of the case as explained above, the ground raised by the assessees relating to taxation of profits on transfer of development rights together with land is allowed." 9.1. The assessee-company filed all the agreements in question on record which were the basis for making the addition against the assessee-company in A.Y. 2008-2009. The assessee-company rightly contended that income from transfer....
X X X X Extracts X X X X
X X X X Extracts X X X X
.....O. asked the assessee-company to furnish explanation regarding income offered of Rs. 1,58,41,532/- on account of sanctioned FSI during the year under consideration. The assessee-company has offered Rs. 3,89,29,660/- as income attributable to sanctioned FSI of 65,428 sq. feet and claimed Rs. 2,30,88,128/- as expenses attributable to sanctioned FSI of 65,428 sq. feet. A.O. has accepted the income offered of Rs. 3,89,29,660/- but disallowed the expenses of Rs. 2,30,88,128/- claimed by the assessee-company. 12. The assessee-company challenged the addition before Ld. CIT(A). The written submissions of the assessee is reproduced in the appellate order in which the assessee-company explained that it has received sanction from GDA for construction of FSI of 65,428 sq. feet. In respect of this FSI, assessee-company is entitled for consideration of Rs. 3,89,29,660/- @ Rs. 595/- per sq. feet from M/s. Saamag Realtors Private Limited. Since the sanction was received for this FSI, the assessee-company in its revised return of income had offered the income relatable to this sanctioned FSI as per computation placed on record. In a nutshell, for the sanctioned FSI of 65,428 sq. feet, net incom....
X X X X Extracts X X X X
X X X X Extracts X X X X
....14. The Learned Counsel for the Assessee reiterated the submissions made before the authorities below and submitted that in assessment year under appeal i.e., 2010-2011 assessee-company has offered income of Rs. 3,89,29,660/- as income and against the said income, it has claimed expenses of Rs. 2,30,88,128/-. Same is mentioned in the computation of income at pages 4 and 14 of the paper book. The net income of Rs. 1,58,41,532/- was thus, offered for taxation in assessment year under appeal. The A.O. has accepted the same, but disallowed proportionate expenses. The Ld. CIT(A) following his order in A.Y. 2008-2009, on which same income have been taxed, did not allow relief to the assessee-company. Learned Counsel for the Assessee referred to PB-281 which is details of proportionate allowance of development expenses claimed for A.Y. 2006-2007 to A.Y. 2014-2015. Learned Counsel for the Assessee submitted that assessee-company has been capitalizing expenses in the books of account and following its methodology regarding offering of income from sanctioned FSI. Whenever FSI is sanctioned, assessee-company offered the income for taxation and claimed proportionate development expenses. He....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ned FSI have been offering income for taxation and has been claiming proportionate expenses of sanctioned FSI. In A.Y. 2013-2014, assessee-company made a claim of development expenses in a sum of Rs. 2,33,12,344/- which have been allowed by A.O. in assessment under section 143(3) of the I.T. Act, 1961. Copy of the P & L A/c for the A.Y. 2013-2014 is filed at page-191 of the paper book and assessment order for A.Y. 2013-2014 is filed at page-202 of the paper book. Similarly, in subsequent A.Y. 2014-2015, the similar claim has been allowed under section 143(1) of the I.T. Act, 1961. Therefore, following the rule of consistency, the Revenue Department cannot take a different stand against the assessee-company. It may be noted here that assessee-company offered the income on the basis of proportionate sanctioned FSI and claimed expenses on the same sanctioned FSI. Therefore, there was no reason to disallow the expenditure claimed by assessee-company which is also accepted by the A.O. in subsequent years. The assessee-company maintained books of account on the same accounting pattern as have been maintained in earlier years and the offering of the income as per sanctioned FSI have....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on the area of land. It is an accepted practice in real estate business to have a number of entities of the same group which has an intention to develop a large/huge real estate project. In such cases, the business of real estate development is jointly done by such group entities in tandem with each other i.e., funds mobilized by each entity for acquiring land, for registration thereof, for development, construction, supervision of construction. The Saamag group of companies and a few outside concerns have expertise in the field of real estate development, came together for development of an Integrated Township in the State of Uttar Pradesh. The group also entered into a Consortium Agreement with the object of development of Integrated Township in the State of Uttar Pradesh. Different responsibilities have been provided to each constituent and assessee-company has been assigned the work of arranging finance and look-after implementation of the project, if awarded. The development of the Integrated Township envisaged acquisition of substantial area of land. These companies have received the advances from other group companies for the acquisition of the lands and other business pu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f it is considered that these advances are business advances, Section 2(22)(e) does not differentiate between trade/business advance or other advance. Since the shareholding was more than 10% in assessee-company, therefore, addition was confirmed and appeal has been dismissed. 21. Learned Counsel for the Assessee reiterated the submissions made before the authorities below and submitted that that funds were taken from sister concerns for business transactions and amounts have been utilised for the purpose of business only. Therefore, the provisions of Section 2(22)(e) of the I.T. Act, will not apply. Further, the issue is covered by the Order of ITAT, G-Bench, in the case of assessee-company and others dated 12.01.2018 (supra). 22. On the other hand, Ld. D.R. relied upon the Orders of the authorities below and submitted that shareholding pattern and profit are not disputed. It is not proved that it was a commercial transaction. It is a loan or advance. Therefore, the addition is rightly made. The Ld. D.R. relied upon decision in the case of Smt. P. Sharada vs. CIT 229 ITR 444. 23. We have heard the rival submissions and perused the material available on record. It is not i....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... as made by the AO. 14.2.1 However, looking into the accounts, the Ld. CIT (A) noticed that the assessee-company had received amounts from various group companies which have to be considered as deemed dividend u/s 2(22)(e) of the IT Act and then enhanced the income of the aforesaid assessee-companies by an amount which had been received. 14.3 The assessee has come forward in the present appeals against the action of the Ld. CIT(A) wherein he has enhanced the income of the assessee with an amount which had been received from other group companies. The assessee objected to the action of Ld. CIT(A) on the following grounds: (i) No opportunity has been granted by the CIT (Appeals) before enhancing the income, hence the enhancement so made by CIT (Appeals) is against the law and in violation of natural justice. (ii) It is a settled rule of law that unless and until the assessee falls within the ambit of charging section by clear words, he cannot be taxed by implications. Hence the charging section has to be construed strictly and for this purpose the appellant relied on the CWT vs. Eliss Bridge Gymkhana in 229 ITR 1. The appellant states that the addi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s within the limits of the Companies Act. It is for this group to determine whether the profits made by the company should be distributed as dividends or not. The declaration of dividend is entirely within the discretion of this group. When the legislature realized that though money was reasonably available with the company in the form of profits, those in charge of the company deliberately refused to distribute it as dividends to the shareholders, but adopted the device of advancing the said accumulated profits by way of loan or advance to one of its shareholders, it was plain that the object of such a loan or advance was to evade the payment of tax on accumulated profits under section 23A. It will be remembered that an advance or loan which falls within the mischief of the impugned section is advance or loan made by a company which does not normally deal in moneylending, and it is made with the full knowledge of the provisions contained in the impugned section. The object of keeping accumulated profits without distributing them obviously is to take the benefit of the lower rate of super-tax prescribed for companies. This object was defeated by section 23A which ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tood in commercial sense and in the manner in which the Court has interpreted the same. The expression 'loan' was under consideration before the various Hon'ble High Courts and the Hon'ble Supreme Court of India. 14.3.6 In the case of Baidya Nath Plastic Industries (P) Ltd. & Others vs. K.L. Anand, Income Tax Officer in 230 ITR 522, the Hon'ble Delhi High Court, which is a Jurisdictional High Court, held that there is a distinction between the loan and deposit. In the case of loan, it is ordinarily the duty of the debtor to seek out the creditor and to repay the money according to the agreement, whereas, in the case of depositor to go to the depositee and make a demand for it. 14.3.7 In the case of Bombay Steam Navigation Co. Pvt. Ltd. vs. CIT in 56 ITR 52, the Hon'ble Supreme Court held that a loan of money undoubtedly results in a debt, but every debt does not involve a loan. Liability to pay a debt may arise from diverse sources, and a loan is only one of such sources. Every creditor who is entitled to receive a debt cannot be regarded as a lender. 14.3.8 In the case of CIT, Lucknow vs. Bazpur Co-operative Sugar Factory Ltd. in 177 ITR 469, the Hon'ble....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... (iii) interest on any term loan sanctioned before the 18th day of June 1980 where the agreement under which such loan has been sanctioned provides for the repayment thereof during a period of not less than three years. Explanation. For the purposes of this sub-clause, "term loan" means a loan which is not repayable on demand; (iv) interest on any deferred credit (that is to say, credit on the terms that the payment is to be deferred) sanctioned by a scheduled bank in connection with the export of capital plant and machinery outside India; (v) interest on any loan in foreign currency sanctioned by any corporation or bank referred to in sub-clause (a) or sub-clause (b) or sub-clause (c) or sub-clause (d) of clause (9) for the import of capital plant and machinery from a country outside India." 14.3.11 The question arises before the Courts, whether the interest on debentures and Govt. Securities are liable to Interest tax or not. The Courts have consistently held that the debenture and the Govt. Securities do not bear the characteristics of loans and advances but they are the mode of investment. Hence, the interest received on debentures and Govern....
X X X X Extracts X X X X
X X X X Extracts X X X X
....disbursement and in case if the investment made by the payer company in their assets are already more than the accumulated profits shown in balance sheet, then it cannot be said that payer company possesses accumulated profits. In the instant case, all the payer companies are having investment in the real estate more than their accumulated profits shown in the balance sheet. 14.4 The Ld. CIT (DR) justified the action of the CIT(A) and stated that the additions as made are in accordance with law because payer companies are having sufficient accumulated profits and the shareholders are common. 14.5 After hearing both the parties and perusing the relevant records, it reveals that they are in the form of current and inter banking accounts and contain both types of entries i.e. giving and taking the amount and appear to be a current account and cannot be considered as loans and advances as contemplated u/s 2(22)(e) of the IT Act. 14.5.1 We find that the Hon'ble Gujarat High Court in the case of DCIT vs. Shutz Dishman Biotech Pvt. Ltd, Tax Appeals No. 958 and 959 of 2015 dated 21st December 2015 held that if the accounts are inter banking accounts maintained by....