TMI Blog2011 (8) TMI 1080X X X X Extracts X X X X X X X X Extracts X X X X ..... d be rejected and percentage completion method be followed. The Bangalore Bench of the Tribunal in the case of PRESTIGE ESTATE PROJECTS (P) LIMITED. VERSUS DEPUTY COMMISSIONER OF INCOME-TAX. [ 2009 (9) TMI 627 - ITAT BANGALORE-B] and relying on the decision of the Hon'ble Supreme Court in the case of COMMISSIONER OF INCOME TAX, CHENNAI VERSUS M/S BILAHARI INVESTMENT (P) LTD [ 2008 (2) TMI 23 - SUPREME COURT] has held that the assessee developer having regularly employed project completion method, which is an accepted method of accounting and the Central Government having not notified AS-7 under sec. 145(2), the AO could not reject the accounts u/s 145(3) on the ground that the assessee has not followed percentage completion method of accounting. We find merit in the submission of assessee that he has to construct the complete building as per the specifications over a period and receive the purchase consideration from time to time from the purchasers and hand over the possession of the building when the building is fully completed, it is only at that time the risks and rewards are transferred to the purchaser. Therefore, Revenue authorities are not justified in reje ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce Act, 2004 w.e.f. 1st April, 2005 i.e. asst. yr. 2005-06, is not applicable to assessee's case. The project undisputedly was approved before 1st April, 2005 therefore the provisions of the old law will apply. Therefore, the assessee cannot be denied the benefit of deduction under sec. 80-IB(10) for the commercial area exceeding 5 per cent of the built-up area or 2,000 sq. ft. whichever is less - Decision in favour of Assesee Deduction u/s 80- IB - Purchasers combined more than one flat- Exceeds Permissible Build Up Area - Revenue objected that the assessee has sold two or more than two flats to one party, the combined area of which is more than 1,000 sq. ft HELD THAT:- We find merit in the submission of assessee that the area of two flats should not be combined even though the two flats were sold to one person as the built-up area of each flat as approved by CIDCO is less than 1,000 sq. ft. as per the approved plan and occupancy certificate received. Also, there is no evidence with the Department that the assessee has sold after combining the two flats together and sold to one party. Therefore, merely because some of the purchasers have purchased more than one flat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r HEBPL is a registered shareholder in the assessee company. It has been held by the Special Bench of the Tribunal in the case of ASSISTANT COMMISSIONER OF INCOME-TAX. VERSUS BHAUMIK COLOUR (P) LIMITED. [ 2008 (11) TMI 273 - ITAT BOMBAY-E] that deemed dividend can be assessed only in the hands of the person who is a shareholder of the lender company and not in the hands of a person other than a shareholder and not in the hands of the borrowing concern in which such shareholder is member or partner having substantial interest. Since the assessee company is not a shareholder in HEBPL, therefore, merely because Smt. Ujjwal Haware is a shareholder in both the concerns having 20 per cent equity share no amount can be taxed in the hands of the assessee company under sec. 2(22)(e) - Addition made deleted - Decision in favour of Assessee - ITA No.5601/MUM/2009, ITA No.6861/MUM/2010, ITA No.1547/MUM/2011 - - - Dated:- 5-8-2011 - SHRI N. V. VASUDEVAN AND SHRI R.K. PANDA, JJ. Shri. J. P. Bairagra, for the Appellant Shri. Goli Sriniwas Rao, for the Respondent ORDER R.K. PANDA, A.M. : The above appeals filed by the assessee are directed against the separate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ewards of ownership and the seller retains no effective control of the real estate to a degree usually associated with ownership. (ii) No significant uncertainty exists regarding the amount of the consideration that will be derived from the real estate sales, and (iii) it is not unreasonable to expect ultimate collection. 3.1 The AO noted that in the instant case, the fact that the assessee has produced the completion certificate from their Architects itself means that there is no existence of any significant uncertainty regarding consideration derived from the business. Also, there is reasonableness in expecting or estimating the ultimate collection when the said project has got completed. The Architect has certified that the Project has been completed at Plot Nos. 52 and 56, Wing A, B, C, D and E, at Khargar, Navi Mumbai, on 30th March, 2006, and Wing G, H and L on 26th June, 2006. Further, in respect of project at Airoli node, Navi Mumbai, Wing A, on Plot No. 1, Sector-19-A, the project was completed on 10th June, 2006. This, therefore, means that the assessee has already recognized the completion of project. He was in a position to submit complete details of sale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A) asked the assessee to file sample copies of the agreements which were entered into with the buyers. On perusal of one such sale agreement dt. 14th Feb., 2005 between the assessee referred to as the builder and one Ms. Waghmare Ors. referred to as purchasers, he noted that the said agreement to sell is a registered agreement according to which the consideration for the property of the residential flat has been fixed at ₹ 4,96,176. The flat has to be delivered to the purchaser within a specified period. The dates on which the consideration has to be paid have also been prescribed and so has the measurement and specifications of the flat. The only condition for termination of the agreement is if the purchaser fails to pay the consideration within the time specified. He also analyzed cl. 11 of the agreement which lays down that the builder shall not be responsible for any loss/damage/injury etc. for reasons beyond their control. In other words, all the risks of the said assets have been transferred to the purchaser vide this agreement. The only obligation of the builder is to complete the flat and handover the possession within 18 months of the agreement. Further according t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loper, as per the Revised Accounting Standard-9 (which is made mandatory by the Institute of chartered accountants to builders and developers) the appellant had correctly determined its income at a loss of ₹ 10,00,345. 3. Estimating the business profits of the appellants, by adopting the percentage completion method. In doing so the learned CIT(A) has erred in applying the provisions of the Revised Accounting Standard (AS)-7, which is applicable to construction contractors and not to builders and developers. 4. In estimating a net profit ratio of 26.74 per cent under the percentage completion method as against a net profit ratio of 5 per cent as adopted by the AO. The net profit ratio of 26.74 per cent in any case is excessive. 5. Without prejudice to the above, the CIT(A) has erred in not granting the appellant deduction under s. 80-IB(10) of the IT Act (ITA), in respect of the estimated profits. 8. The learned counsel for the assessee submitted that this is the second year of operation. During the asst. yr. 2004-05, the assessee company has declared a loss of ₹ 5,63,501. He submitted that in the preceding year five projects were undertaken by the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee by adopting the percentage completion method. 9. As regards the observations of the learned CIT(A) that all the risk of the assets have been transferred to the purchaser vide agreement with Ms. Waghmare, the learned counsel for the assessee referring to p. 189 of the paper book submitted that cl. 11 of the sale agreement which has been referred to by the learned CIT(A) mentions loss or damages on account of natural causes i.e. lightning, explosion, flooding, riots and war etc. which are not in the control of the assessee. However the assessee is responsible for all the losses and damages caused during the course of construction activity, and even after these losses/damages, the assessee has to complete the project and, therefore, for this losses and damages the assessee is responsible. Referring to the cl. 19(A) of the said agreement (at p. 190 of the paper book) and referred to by the learned CIT(A), the learned counsel for the assessee submitted that as per the said clause, the purchaser shall have no claim in respect of open spaces, lobbies, stair-case, terraces etc. which shall remain the properties of the builders until the whole project is transferred to the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A) and the paper book filed before us. We have also considered the various decisions cited before us. There is no dispute to the fact that the assessee company is engaged in the business of construction and builders and during the asst. yr. 2004-05 the project completion method followed by the assessee has been accepted. The submission of the learned counsel for the assessee that the Revenue has not taken any remedial measure under s. 263 or 147 for the asst. yr. 2004-05 and 2006-07 even after the order of the AO and learned CIT(A) for asst. yr. 2005-06 could not be controverted by the learned Departmental Representative We find the assessee in its notes to accounts for the year ended 31st March, 2004 at cl. 1(c) of notes has mentioned as under : c. Revenue Recognition : The company is following AS 9 (Revised) Revenue Recognition issued by the Institute of Chartered Accountants of India for income recognition. Revenue is recognized following the principle of accounting standard issued by the Institute of Chartered Accountants of India, whereby the profit is recognized on the completion of projects when the risk of ownership is transferred to the customer. 12. Si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decision of the Hon. Supreme Court in the case of CIT vs. Bilahari Investment (P) Ltd. (supra) and the decision of the Tribunal in the case of H.M. Constructions vs. CIT (2004) 90 TTJ (Bang) 510 has held that the assessee developer having regularly employed project completion method, which is an accepted method of accounting and the Central Government having not notified AS-7 under s. 145(2), the AO could not reject the accounts under s. 145(3) on the ground that the assessee has not followed percentage completion method of accounting. 13.3 Now coming to the finding of the learned CIT(A) that all risks and rewards in the property sold as per the sale agreement has been transferred to the buyer, we find cl. 11 of the sale agreement (p. 189 of the paper book) which is referred to by the learned CIT(A) mentions loss or damages on account of natural causes i.e. lightning, earthquake, flooding, riots and war, etc. These are the losses which are not in the control of the assessee. However, the assessee is responsible for all the losses and damages caused during the course of the construction activity and even after these losses and damages, the assessee has to complete the project and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pletion method, consistently followed by the assessee. Accordingly, the order of the learned CIT(A) is set aside and the grounds of appeal Nos. 1 to 4 raised by the assessee are allowed. 13.10 Since the project completion method of the assessee has been accepted by us, the without prejudice ground of the assessee challenging non-granting of deduction under s. 80-IB(10) becomes academic in nature and hence the same is not being adjudicated. 13.11 The appeal filed by the assessee for the asst. yr. 2005-06 is accordingly allowed. ITA No. 686/Mum/2010; Asst. yr. : 2006-07 14. The grounds of appeal No. 1 (i) 1 (ii) by the assessee read as under : 1. On facts and in circumstances of the case and in law, the CIT(A), has erred in : (i) Not granting deduction of ₹ 7,21,60,252 as claimed by the appellant under s. 80-IB(10) of the IT Act, in respect of the projects comprising of Gulmohar and Splendour constructed at Plot Nos. 52/20 and 56/20, Sector 20, Kharghar, Navi Mumbai. (ii) Not appreciating that s. 80-IB(10) of the IT Act is an incentive provision for economic growth and has to be interpreted liberally. In doing so, the AO as well as CIT(A) have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee at 682.216 sq. mtrs is more than 2000 sq. ft. and more than 5 per cent of the total project area therefore, the AO was of the opinion that the assessee is not entitled to deduction under s. 80-IB(10) of the Act. 16. As regards the condition that the residential unit has a maximum built-up area of one thousand square feet, the AO noted that some of the purchasers have bought adjacent flats and the sum total of these flats exceed 1000 sq. ft. Relying on a couple of decisions, the AO was of the opinion that the adjacent houses constitute a single house for the purpose of income from house property . Since some of the purchasers have purchased two or more such flats which are adjacent to each other and the total area exceeds 1000 sq. ft. the AO was of the opinion that the conditions prescribed under s. 80-IB(10) are not fulfilled. Since the assessee failed to comply with the specific conditions laid down in sub-cls. (a) and (c) of s. 80-IB(10), the AO, relying on a couple of decisions, held that the assessee is not entitled to claim the deduction under s. 80-IB(10) amounting to ₹ 7,07,88,251. The AO further noted that as per the provision of s. 80-IB(10), the project sho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce the case of the assessee relates to the post-amendment period i.e. asst. yr. 2006-07, therefore, it is not covered by the decision of the Special Bench of the Tribunal. As regards the objection to the treatment of two flats sold to same person as single unit and, therefore, the area exceeds 1000 sq. ft, he noted that the purchaser of the property is a single person and he has purchased more than 1,000 sq. ft. unit and hence this argument of the assessee cannot be accepted. As regards the submission of the assessee that open terrace are to be excluded from the built-up area, the learned CIT(A) was of the view that the amended provision is applicable for asst. yr. 2005-06 and onwards and shall apply to the assessee as well and hence the AO was right in including the terraces in the built-up area which clearly falls under the definition of built-up area as provided under s. 80-IB(14)(a). Relying on a couple of decisions, the learned CIT(A) was of the opinion that taxing statutes have to be strictly construed and nothing can be read in it. Since the assessee in the instant case has not fulfilled the conditions mentioned in s. 80-IB(10), the learned CIT(A) rejected the various ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubmitted that area of none of the flats exceeds 1,000 sq. ft., if the terrace area is excluded. He submitted that in the common parlance, terrace is not to be accounted for in the built-up area. Even as per CIDCO rules, terrace area is not included in the built-up area and thereby, not accounted for in the FSI. He submitted that the definition of built-up area is introduced by the Finance Act, 2004 by introducing sub-s. (14)(a) in s. 80-IB w.e.f. 1st April, 2005 and, therefore, the same is not applicable to the projects approved and commenced before 1st April, 2005. Referring to the decision of the Tribunal in the case of Asstt. CIT vs. Sheth Developers (P) Ltd. (supra) he submitted that it has been held that prior to 1st April, 2005, balcony would not form part of the built-up area. The definition of built-up area introduced by the Finance Act, 2005 was manifestly prospective. It has further been held in the said decision that where, any unit excluding the balcony area, was of more than 1,000 sq. ft., the assessee was entitled to the deduction under s. 80-IB(10) on pro rata basis, in respect of the flats of 1,000 sq. ft. or less and the deduction cannot be denied. 22. The l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ony and terrace area has to be excluded (sic'included) for the purpose of calculating the area of 1,000 sq. ft. 25. We find the learned CIT(A) while deciding the issue rejected the various decisions cited before him and had confirmed the action of the AO. 26. It is the submission of the learned counsel for the assessee that balcony and terrace area has to be excluded for the purpose of calculation of the carpet area of 1,000 sq. ft. Similarly since the assessee has sold each flat under separate agreement, and the assessee has not sold two flats by combining them together as one flat to one party, therefore, the area of two flats or more than two should not be combined even though these flats were sold to one person. Similarly it is the submission of the learned counsel for the assessee that when the approval is obtained prior to 31st March, 2005, the condition of shopping area not exceeding 5 per cent of built-up area or 2,000 sq. ft whichever is less, as introduced by the subsequent amendment, are not applicable in respect of projects approved and commenced before 1st April, 2005. 27. We find merit in the above submissions of the learned counsel for the assessee. As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the area of commercial space in a housing project the assessee would loose his eligibility to claim deduction. In such cases there is definitely grave hardship to the assessee. The interpretation sought to be canvassed by the learned Departmental Representative will also lead to absurd situation. Let us assume an assessee obtains approval of a housing project prior to 1st April, 2005 say in previous year relevant to asst. yr. 2002-03. He builds commercial space in excess of 2,000 sq. ft. in the housing project. He follows percentage completion method of accounting and offers profits in asst. yrs. 2002-03 to 2004-05, claims exemption under s. 80-IB(10) and is allowed exemption. On the same project in asst. yr. 2005-06, the assessee would not get the benefit of s. 80-IB(10). We therefore find no grounds to take a view different from the one taken by the Co-ordinate Bench of the Tribunal in the case of Saroj Sales Organization (supra). 27. We are of the view that we are not supplying any words to the statute but are only holding that the law as it existed in the asst. yr. 2004-05 when the assessee submitted its proposal for slum rehabilitation and the permission for carrying o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 2005 i.e. asst. yr. 2005-06, is not applicable to assessee's case. Therefore, the assessee cannot be denied the benefit of deduction under s. 80-IB(10) for the commercial area exceeding 5 per cent of the built-up area or 2,000 sq. ft. whichever is less. 30. As regards the second objection of the Revenue that the assessee has sold two or more than two flats to one party, the combined area of which is more than 1,000 sq. ft., we find merit in the submission of the learned counsel for the assessee that the area of two flats should not be combined even though the two flats were sold to one person because (a) the built-up area of each flat as approved by CIDCO is less than 1,000 sq. ft. as per the approved plan and occupancy certificate received. (b) the assessee has sold each flat under separate agreement. (c) the assessee has not sold two flats by combining these together as one flat to one party and (d) there is no evidence with the Department that the assessee has sold after combining the two flats together and sold to one party. Further there is no evidence on record to suggest that the assessee itself has advertised that the flats were of more than of 1,000 sq. ft. and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duction under s. 80-IB(10). Further the assessee has given the chart, copy of which is placed at page No. 165, according to which the AO in some of the cases has adopted the wrong figure, although the built-up area including the balcony put together does not exceed 1000 sq. ft. 32.1 It has been held in various decisions that if some of the flats in a housing project exceed the permissible limit, then the benefit of deduction under s. 80-IB(10) has to be granted on pro rata basis and the assessee cannot be denied the exemption. However, since the area of none of the flats exceeds 1,000 sq. ft. after excluding the balcony/terrace, the assessee, in our opinion, has not violated this condition. 33. Considering the totality of the facts of the case and in view of the decisions cited above, we do not find any reason why the assessee shall not be granted the benefit of deduction under s. 80-IB(10). We therefore, set aside the order of the learned CIT(A) and direct the AO to grant the benefit of deduction under s. 80-IB(10). The grounds of appeal No. 1(i) and 1(ii) by the assessee are allowed. 34. The ground of appeal No. 1(iii) reads as under : (iii) Not reducing the profits ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The AO noted that out of the above projects, revenues have been recogonised for Gulmohar (ABCDE) and Splendor (GHL) in asst. yr. 2006-07. The sale of the unsold stock of these buildings is offered in asst. yr. 2007-08. As the other projects are not completed, revenue therefrom has not been recognized. Out of the above projects, according to the assessee, the projects'Gulmohar, Splendor and Glory are s. 80-IB(10) compliant projects. As far as the other projects are concerned the assessee has not recognized any profits following project completion method. 37.4 So far as the incomplete projects are concerned, the AO asked the assessee to compute the profit @ 25 per cent on the increase of WIP during the year. From the various submissions filed by the assessee, the AO noted the increase of WIP project wise is as under : Site Opening WIP Closing WIP Difference Estimated profit @ 25% Airoli 4,01,76,202 5,58,11,877 1,56,35,675 39,08,918 Khargar 184/13 Tiara 2,10,53,789 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... profits at ₹ 6,29,38,999, on the grounds that occupation certificate in respect of these wings were received on 26th June, 2006 and 29th Sept., 2006. In doing so, both the AO as well as the CIT(A) have further erred in rejecting the appellant's plea that revenue in respect of I, J K Wings was not recognized following the principles of Accounting Standard-9, according to which revenue in respect of these Wings was recognized in asst. yr. 2008-09 i.e. financial year 2007-08. 39.1 Facts of the case, in brief, are that the assessee has showed Gulmohar and Splendor as completed in asst. yr. 2006-07. These buildings are constructed on Plot Nos. 52 and 56 at sector 20, Kharghar and are forming part of one commencement certificate. The names of the buildings are Gulmohar, Splendor and Glory. The assessee has accounted the profits of Gulmohar (A,B,C,D E) and Splendor (G, H L) in asst. yr. 2006-07. From the details of receipt of the part occupation certificate obtained by the assessee, the AO noted the following facts : Name of the Wing Date of OC Gulmohar (A,B,C,D,E) 26-6-2006 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the commencement certificate. The assessee has obtained part occupancy on the basis of the work completed, building wise. The reference given by the assessee that the occupation certificate is obtained only on 31st March, 2008 is only an indication that the entire work as per the commencement certificate of 14 buildings are complete. The assessee has, in case of part OC received, recognized the revenue in spite of not receiving the OC. Thus the assessee is not consistent in following the method of accounting adopted by its. Rejecting the various explanations given by the assessee, the AO made addition of ₹ 6,29,38,999 which was upheld by the learned CIT(A). Aggrieved with such order of the learned CIT(A) the assessee is in appeal before us. 40. The learned counsel for the assessee submitted that though occupancy certificate is received on 1st Dec., 2006, but the possession of the flats were handed over to the purchasers in the next year as certain works on the amenities provided by the assessee company were not upto the specifications and therefore, the purchasers have not taken possession and hence, work had to be redone to meet their specifications. Accordingly, the po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied on the order of the AO and the learned CIT(A). 42. We have considered the rival arguments made by both the sides, perused the orders of the AO and learned CIT(A) and the paper book filed on behalf of the assessee. The only dispute in the impugned ground is regarding taxability of income from I , J and K wing of the building Splendour . According to the AO since O.C. in respect of these wings were received on 26th June, 2006 and 29th Sept., 2006, therefore, revenue should have been recognized during this year. It is the submission of the learned counsel for the assessee that since certain works on the amenities were to be redone, the flats were handed over in the next financial year and revenue has been recognized accordingly. Alternatively, it is the submission of the learned counsel that if revenue is recognized during the year, the profit will be exempted under s. 80-IB(10) and, therefore, the same is revenue neutral. We find the assessee has submitted before the AO that the flats were handed over only in the next financial year. An affidavit of the Director to this effect has also been filed. However, the AO has not conducted any independent enquiry from any of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions laid down therein being area of flats exceeding BUA 1000 sq. ft. and combined area of flats exceeding 1,000 sq. ft., that commercial area exceeds 5 per cent or 2000 sq. ft. whichever is less and that no claim for deduction under s. 80-IB(10) was made for Splendor J, K, L building in the return of income filed. The AO further noted that as per amendment by Finance Act, 2004, the maximum permissible commercial area has to be at 5 per cent of total project area or 2,000 sq. ft. whichever is less. According to the AO as per s. 80-IB(10) the project under reference must necessarily be a housing project and housing project alone whereas the CIDCO has approved the project as a 'residential' cum 'commercial' project. In view of these facts, the AO rejected assessee's claim of deduction under s. 80-IB(10) of the IT Act. 45. Before the learned CIT(A), the assessee submitted that the project was approved on 10th Oct., 2003, during which time the restrictive conditions to commercial area were not there in the statute book and conditions as spelt by AO was brought out by the Finance Act (No. 2) of 2004. The assessee submitted that the objection of the AO that two fla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t provisions of s. 2(22)(e) is attracted and asked the assessee as to why the amount should not be taxed as deemed dividend under s. 2(22)(e) of the IT Act. AO also reproduced provisions of s. 2(22)(e) in the assessment order on p. 21 and also noted that M/s HEBPL and the assessee company are not companies in which public are substantially interested. AO further noted that amount received in assessee's account for application as desired by the assessee and it is not for the business application of the donor and the same is shown as loan under the head 'loans and advances' from a company. Accounts of assessee nowhere revealed the receipt of ICD in balance sheet. In view of these facts AO held that loan received from M/s HEBPL by the assessee company is deemed dividend and assessee must be deemed to have received dividends on the dates on which assessee withdrew the said amounts from the company. According to the AO loan or advance taken from the company may have been ultimately repaid or adjusted but that will not alter the fact that the assessee in the eye of law, had received dividend from the company during the relevant account period. For the above proposition, the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n transferred by HEBPL through different banks regularly from 15th April to 31st March, 2007. Regular transfer of funds does not prove that these are for a transfer against cost of some plots. Further, the assessee has also produced the copy of agreement dt. 23rd April, 2007 through which the land has been transferred. However, there is no link between the two. Further, payment of ₹ 93 lacs only has been made as per agreement and there is no reference of any advance given. Thus, the claim of the assessee that advance was made for purchase of plot is not supported by any evidence. He distinguished the decision in the case of Bombay Oil Industries Ltd. (supra) by holding that the lender company in that case was engaged in the business of giving loans. The other cases relied upon by the assessee are also based on different set of facts and hence not relevant to the case of the assessee. He accordingly upheld the action of the AO. 48.4 Aggrieved with such order of the learned CIT(A) the assessee is in appeal before us. 49. The learned counsel for the assessee referring to the copy of the agreement dt. 16th April, 2007 entered into between HEBPL and the assessee company (pla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the fiction would not be pressed beyond its true limits. The requisite condition for invoking s. 2(22)(e) is that payment must be made by way of loan or advance. Since there is a clear distinction between the inter-corporate deposits vis- -vis loans/advances, the lower authorities were not right in treating the same as deemed dividend under s. 2(22)(e) since it was held that ICDs do not come within the purview of deemed dividend under s. 2(22)(e). 49.6 He submitted that if the transaction between company 'A' and company 'B' was a normal business transaction, it cannot be termed as deemed dividend under s. 2(22)(e) because of the shareholding pattern of two companies. For this preposition he relied on the following decisions : (a) CIT vs. Ambassador Travels (P) Ltd. (2008) 220 CTR (Del) 475 : (2008) 8 DTR (Del) 108 : (2009) 318 ITR 376 (Del) (b) NH Securities Ltd. vs. Dy. CIT (2007) 11 SOT 302 (Mumbai) 49.7 Referring to the copy of day to day account of HEBPL in the books of the assessee company for the year ended 31st March, 2007 including giving each debit and credit and daily balance (Page Nos. 230 to 235 of the paper book) he submitted that there w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t applies to the case of loans or advances by a company to a concern in which its shareholder has substantial interest is based on the presumption that the loan or advances would ultimately be made available to the shareholders of the company giving the loan or advance. The intention of the legislature is therefore to tax the dividend only in the hands of the shareholder and not in the hands of the concern. He submitted that the above view of the Special Bench of the Tribunal has been upheld by the Hon'ble jurisdictional High Court in the case of CIT vs. Universal Medicare (P) Ltd. (2011) 237 CTR (Bom) 147: (2010) 37 DTR (Bom) 409: (2010) 324 ITR 263(Bom). Similar view has been held by the Hon'ble Delhi High Court in the case of CIT vs. Ankitech (P) Ltd. Ors. (ITA No. 462 of 2009 order dt. 11th May, 2011) [reported at (2011) 242 CTR (Del) 129: (2011) 57 DTR (Del)345'Ed.] wherein the Hon'ble Delhi High Court has followed the decision of the Special Bench of the Tribunal. Since the assessee is not a registered shareholder in Haware Engineers (P) Ltd., therefore, it cannot be treated as deemed dividend in the hands of the assessee company. 49.11 He submitted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has got free reserves of ₹ 50.96 crores. We find the assessee company has furnished a list of shareholders of HEBPL and HCPL (placed at paper book pp. 227 and 228) details of which are as under : Haware Engineers Builders (P) Ltd. List of Shareholders Sr. No. Name of shareholder 31-3-2007 31-3-2006 No. of shares held Nominal value ₹ 100 each 1 Nalini Haware 12,472 12,472 2 Anjali Haware 12,000 12,000 3 Pravin Haware 12,236 12,236 4 Ujjwala Haware 9,750 9,750 5 Satish Haware 169,986 169,986 6 Haware Lotus Hotels 56,000 56,000 7 Haware Infotech ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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