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2017 (11) TMI 1840 - AT - Income TaxDeemed dividend u/s 2(22) (e) - assessee has taken an advance from M/s. Competent Holding ltd wherein the assessee is a Director and holding beneficial ownership of more than 10% - assessee submitted that the above sum was received by assessee for advance against sale of property therefore, it is a business transaction - whether it is a “trade advance” or not ? - AY 2008-09 - HELD THAT:- Before us assessee has not furnished the Ledger account of the above company in books of the assessee or the Ledger account of the assessee from the books of the company, hence, we are unable to determine the exact amount of trade advances on account of these transaction. Even otherwise if it is accepted that balance of ₹ 70 lakhs paid by the company to the assessee is also part of these transaction, even then a sum of ₹ 23 lakhs is required to be explained by the assessee that they are forming part of the consideration of these “sale agreement” between the assessee and the competent Holdings private limited. Furthermore, the confusion has also arisen because assessee has submitted the copy of the memorandum of understanding dated 1/9/2008 between the assessee and the competent Holdings Ltd wherein in the last paragraph of page No. 1 it has been mentioned that the competent Holdings Ltd has entered into an agreement to sell dated 09/01/2008 with the 1st party to purchase entire basement floor, for a sum of ₹ 1.25 crores and advanced the sum of ₹ 98 lakhs to the 1st party. However, in absence of the Ledger account it cannot be verified that on that particular date i.e. on 1/9/2008 the competent holding Ltd has paid a sum of ₹ 98 lakhs to the assessee or not. We set aside the issue for verification of the amount received by the assessee in pursuance of this agreement as trade advance to the file of the Ld. assessing officer with a direction that if the assessee has received the above sum after 09/01/2008 up to 31/03/2008 in pursuance of this agreement then such amount cannot be treated as deemed dividend under section 2 (22) (e) of the act. In view of this ground No. 1 and 2 of the appeal of the revenue are set aside to the file of the Ld. Assessing officer with above direction. In the result ground No. 1 and 2 of the appeal of the revenue is partly allowed . AY 2009-10 - sums of ₹ 60 lakhs are also advance against rent or security deposit for rent. If the amount of ₹ 37 lakhs is clubbed with the transaction of the above commercial transaction of the sale of property between the assessee and the M/s. Competent Holding Ltd than as on 30/03/2009 the assessee is having only loan of ₹ 60.75 Lacs. The assessee has paid back the sum of ₹ 75,000/- to the company on 31/03/2009 leaving deposit of ₹ 60 lakhs as per agreement. Therefore, it is apparent that the whole transaction was the transaction of security deposit with the assessee for use of the property of the assessee on rent as well as to facilitate the mortgage of the assessee’s property for the purpose of loan to the company for purchase of new property. Therefore it cannot be denied that above transactions are transactions of commercial nature between the assessee and the company which are beyond the scope of loans and advances as per provisions of section 2 (22) (e) of the act. In view of the above facts the addition in the hands of the assessee of ₹ 37 lakhs which is less than ₹ 60 lakhs required to be retained by the assessee as security deposit, cannot be made under section 2 (22) (e) of the act. In view of this, the solitary ground in appeal of the assessee is allowed.
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