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2019 (10) TMI 442 - ITAT BANGALOREValidity of rectification order passed by the AO u/s 154 - AO mentioned in the notice that the development expenses is capital in nature and hence the same is proposed to be disallowed - HELD THAT:- There is no dispute with regard to the fact that the assessee was not the owner of land on which the impugned amount of ₹ 8.50 lakhs was spent. Hence the question of treating the same as Capital expenditure does not arise. The assessee has undertaken to sell the land belonging to other person and accordingly he has entered into an agreement to sell the land with a person named Shri D.K.Sharma, admittedly, as representative of the owner of the land. In our view, the above said activities carried on by the assessee can only considered as real estate activity carried on by the assessee. There is also no dispute with regard to the fact that the assessee has incurred the expenses of ₹ 8.50 lakhs on the development and maintaining the land and the gross receipts of ₹ 100 lakhs, being the advance amount forfeited, was also arisen in respect of the very same land - there is merit in the contentions of the assessee that the development/maintenance of land is related to the real estate activity carried on by the assessee and the above said amount of ₹ 100 lakhs was also received out of the said activity only - the assessee is entitled to claim deduction of ₹ 8.50 lakhs against the gross receipts of ₹ 100 lakhs. Hence we are of the view that the Ld CIT(A) was not justified in confirming the disallowance of ₹ 8.50 lakhs. We also find merit in the alternative contentions of the assessee that the issue relating to deduction of ₹ 8.50 lakhs against the gross receipts of ₹ 100 lakhs is a debatable issue and hence the same is outside the scope of rectification proceedings. Accordingly the impugned orders are liable to be quashed on this ground also. Deemed dividend u/s 2(22)(e) - HELD THAT:- The assessee has maintained a current account/running account with the above said company and the outstanding balances were fluctuating during the course of hearing. We notice that, most of the time, the assessee’s money was lying with the above said company and only for a short period of about two months, the company’s money was available with the assessee. Hence the ratio of above said decisions can also be conveniently applied to the facts of the present case. Hence there is merit in the alternative contention of the assessee. The amount of ₹ 100 lakhs given to the assessee by the above said company cannot be considered as loan or advance within the meaning of provisions of sec. 2(22)(e) of the Act. Accordingly we set aside the order passed by the ld CIT(A) on this issue and direct the AO to delete the addition made u/s 2(22)(e) of the Act.
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