9911796707
TMI Blog2011 (8) TMI 1080X X X X Extracts X X X X X X X X Extracts X X X X ..... ssive basis in each year depending upon the progress. This method would continue to apply to projects which commenced prior to 1st April, 2003. Now due to the revision in AS 9, for projects commence after 1st April, 2003, 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 the projects when the risk of ownership is transferred to the customer. Sales of flats and shops is booked when the project is fully complete." The assessee further submitted that AS 7 is for accounting for Construction Contracts which has to be distinguished from the activity of a Builder and Developer. The para 1 of AS 7 was brought to the notice of the AO. It was submitted that it does not cover the case of a builder or developer in whose case the general principles of revenue recognition as per AS-9 would become applicable. 3. However the AO was not satisfied with the explanation given by the assessee. According to him the assessee has taken recourse to AS-9 for recognition of its project, when the risk of ownership is transferred to the customer. This is however incorrect. Accor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... He noted from the P&L a/c in Sch. 13 that the WIP shown for Airoli and Khargar project are as under : "(a) Airoli : Rs. 2,05,03,247 (b) Gulmohar (i) Splender Rs. 6,89,05,438 (c) Gulmohar Rs. 1,36,25,946 Total : Rs. 10,30,34,631 He further noted from the details filed by the assessee along with the return that the following amount has been shown as increase/decrease in WIP : Opening Rs. 4,29,50,093 Closing Rs. 26,20,43,984 Increase Rs. 21,90,93,891 However, in the P&L a/c, the assessee has debited an amount of Rs. 21,90,93,891 as cost incurred during the year and further reduced Rs. 13,08,147 as indirect expenses from the WIP of Rs. 21,90,93,891 and shown business loss of Rs. 10,03,842. At the same time, the amount received from the customers amounting to Rs. 14,54,23,513 has been shown under the head "Sundry creditors". 4.1 Since the assessee did not offer any details of cost incurred and details of sales to customers, therefore, the AO treated the WIP shown for the project already completed for determining the income of the assessee. He accordingly, calculated the total income of the assessee at 5 per cent of Rs. 10,30,34,631 which comes to Rs. 51,51,731 as again ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tal income prior to claiming exemption under s. 80-IB(10) have been declared at Rs. 7.07 crores and Rs. 2.04 crores respectively. He noted that for the asst. yr. 2006-07, the assessee has declared net profit of Rs. 7.07 crores as against sales of Rs. 15.81 crores and the net profit ratio comes to 26.73 per cent He therefore, directed the AO to apply the net profit ratio of 26.74 per cent to the total increase in work-in-progress relating to those projects in whose case sale agreements have been executed prior to or during the financial year 2004-05, in order to arrive at the taxable income for the asst. yr. 2005-06. According to him this would be in accordance with the percentage completion method prescribed by the accounting standards. 7. Aggrieved with such order of the learned CIT(A), the assessee is in appeal before us with the following grounds : "1. Enhancing the appellant's income without issuing a notice to that effect. The enhancement as made by the learned CIT(A), without granting any opportunity to the appellant violates the provisions of s. 251(2) of the IT Act. 2. Rejecting the project completion method of accounting which has been regularly followed by the ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igh Court. For this proposition he relied on a series of decisions as mentioned in the paper book. He submitted that the assessee company has declared income on completion of the projects in the subsequent year, which is much more than the small amount estimated by the AO during this year. Even while computing the income on completion of the project, the AO has not allowed the deduction of the income estimated during this year. He submitted that the AO has accepted the completion method for the asst. yrs. 2004-05 and 2006-07, as in those years no income has been estimated in respect of incomplete projects. In the asst. yr. 2004-05, the return was accepted under s. 143(1) and the method followed by the assessee company in this year stands accepted by the Department, since no action under ss. 147 or 263 has been initiated. Similarly during the asst. yr. 2006-07, the assessment has been completed under s. 143(3) and the AO has not estimated income in respect of incomplete projects, and the project completion method followed by the assessee company has been accepted. Referring to a number of decisions, he submitted that the Revenue authorities are not justified in rejecting the project ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the income of the assessee by directing the AO to adopt 26.74 per cent net profit to the total increase in work-in-progress, relating to those projects in whose case sale agreements have been executed prior to or during the financial year 2004-05, in order to arrive at the taxable income. He submitted that the learned CIT(A) was also not justified in not allowing deduction under s. 80-IB(10) in respect of such profit so estimated, when the assessee is otherwise eligible to deduction under s. 80-IB(10). Referring to a series of decisions he submitted that the Tribunal has power to allow relief to the assessee to which it was otherwise entitled to even though no claim was made by the assessee in the return of income. He also relied on the CBDT Instruction No. 4 of 2009 dt. 30th June, 2009 wherein the Board have clarified that deduction under s. 80-IB(10) can be claimed on a year to year basis where the assessee is showing profit from partial completion of the project in every year. 10. The learned Departmental Representative on the other hand, relied on the order of the AO and the learned CIT(A). 11. We have considered the rival arguments made by both the sides, perused the orders ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gnized method of accounting and the condition is that the same method has to be followed consistently. Since the assessee in the instant case was regularly following the project completion method and has offered the income in the year of completion of project, therefore, we do not find any sound reason as to why the same should be rejected and percentage completion method be followed. 13.1 We find the Co-ordinate Bench of the Tribunal in the case of Awadesh Builders vs. ITO (2010) 37 SOT 122(Mumbai) has held that project completion method adopted by the assessee builder and real estate developer is justified instead of the percentage completion method as computed by the Department. While giving this finding, the Hon. Tribunal relied on the decision of the Hon. Supreme Court in the case of CIT vs. Bilahari Investment (P) Ltd reported in (2008) 299 ITR 1(SC) and decision of the Hon. Supreme Court in the case of CIT vs. Realest Builders & Services Ltd. (2008) 307 ITR 202(SC). The Hon'ble Tribunal also considered AS-7 and AS-9 issued by ICAI. 13.2 We find the Bangalore Bench of the Tribunal in the case of Prestige Estate Projects (P) Ltd. vs. Dy. CIT (2010) 129 TTJ (Bang) and rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the learned counsel for the assessee that the assessee 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, occupation certificate is received and it is only at that time the risks and rewards are transferred to the purchaser. 13.7 We, therefore, are of the opinion that the Revenue authorities are not justified in rejecting the project completion method. In our opinion, merely on the basis of one sample agreement, the learned CIT(A) cannot come to the conclusion that all the risks and rewards in the property sold as per the sale agreement have been transferred to the buyer. 13.8 We also find merit in the submissions of the learned counsel for the assessee that the learned CIT(A) while enhancing the income of the assessee has not issued the enhancement notice which is statutorily required as per the provisions of s. 251(2) of the IT Act, for which also his order has to be set aside. 13.9 In this view of the matter, we hold that the learned CIT(A) is not justified in rejecting the project compl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 05.208 sq. mtrs. (units 126) and commercial constructed area at 682.216 sq. mtrs. (units 45). From the approval plan submitted by the assessee, the AO noted the following : Total plot area 15599.98 sq. mtrs. Permissible BUA 23399.97 sq. mtrs. Permissible Commercial Area 460.939 sq. mtrs. 15.1 From the approval letter given by CIDCO, the AO noted that the assessee was supposed to build the maximum commercial area for construction at 15 per cent. However, the assessee in the instant case has constructed total commercial area of 682.216 sq. mtr. out of 5287.424 sq. mtr. of project completed as per part occupancy certificate issued by CIDCO vide its letter bearing No. CIDCO/BP/ATPO/1338 dt. 29th Sept., 2006. Thus the commercial area constructed by the assessee works out to 6.75 per cent. According to the AO the amendment of the Finance Act, 2004 pegs the maximum permissible commercial area to be at 5 per cent of total project area or 2000 sq. ft. whichever is less. Since the commercial area constructed by the assessee 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 enti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w.e.f. 1st April, 2005 i.e. asst. yr. 2005-06. Before that, open terrace area was not to be included in the "built-up" area. It was also submitted that CIDCO authorities approved the project prior to the amendment of Finance Act, 2004 which included balconies and terraces. The decision of the Special Bench of the Tribunal in the case of Brahma Associates vs. Jt. CIT (2009) 122 TTJ (Pune)(SB) 433 was also bought to the notice of the learned CIT(A). It was accordingly submitted that the assessee is entitled to claim the benefit of deduction under s. 80-IB(10) amounting to Rs. 7,07,88,251. 18. However the learned CIT(A) was not convinced with the arguments advanced before him. He observed that there is no such finding given by the Special Bench of the Tribunal in the case of Brahma Associates (supra) with reference to the projects which were approved on 10th Oct., 2003. The decision in the said case relates to the commercial area before amendment which has been allowed from 5 per cent to 10 per cent. Since 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Revenue that two or more flats have been sold to the same person and, therefore the built-up area of the unit exceeds 1,000 sq. ft, the learned counsel for the assessee submitted that the area of these flats cannot be combined together since the assessee has sold these two flats in separate agreements. The flats were approved by the CIDCO as two separate flats. He submitted that there is no evidence with the AO that the assessee has sold these two flats as a single flat after combining the total area together. He submitted that the Revenue has not verified even till today as to whether these flats are used as one flat or two flats. He submitted that the assessee is not responsible if after purchasing these two flats separately, these are used by the purchaser as one flat. Referring to the various pages of the paper book, the learned counsel for the assessee submitted that in most of the cases the built-up area of each flat is less than 1,000 sq. ft. even after including the terrace area. He submitted 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... q. ft. therefore, the same is not entitled to the benefit of deduction under s. 80-IB(10). For this purpose, he took the example of Aleyomana Edicula who has purchased the flat Nos. G-102 and G-103. Similarly New City Education Trust has purchased the Flat Nos. H-101, H-102, H- 104, H-105 and H-106, the total of which comes to 4321 sq. ft. 3. Majority of flats sold in project Splendor 52/20 and Splendor 56/20 were exceeding area of 1,000 sq. ft. including balcony and terrace, as according to the AO balcony 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... commercial area that can be built in a housing project. Let us assume that the assessee complies with all the conditions for allowing relief under s. 80-IB(10) i.e., it is approved as a housing project by the local authority but the area of commercial space as approved by the local authority is more than 2,000 sq. ft. The assessee commences the project but is able to complete only in the previous year relevant to asst. yr. 2005-06. As per the change in law from asst. yr. 2005-06 with regard 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 pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d raised by the Revenue is dismissed and the ground raised by the assessee in the CO is allowed." 29. Since the approval in the instant case was obtained on 10th Oct., 2003 i.e. prior to 1st April, 2005, therefore, in view of the decision cited above and in view of the consistent decisions of the Co-ordinate Benches of the Tribunal in various other cases (copies of which are placed in the paper book) we hold that the amendment as introduced by the Finance Act, 2004 w.e.f. 1st April, 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 appr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he consistent view that when the assessee submits the proposal for carrying out the development of a housing project, then whatever law is there on that day, that would regulate the rights of the assessee. In the instant case, undisputedly the project was approved on 10th Oct., 2003 i.e. prior to 1st April, 2005, therefore, we are of the opinion, that the Revenue authorities are not justified in including the balcony/terrace in the built-up area so as to deny the benefit of deduction 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i-1/19 Nilambari 2. Kamothe 49, 57 to 62/36 3. Kharghar 184/13 Tiara 4. (iv) 56/20 Splendor (GHL) 5 Nerul'89 to 92/19-A Centurian 6 Tilak Nagar'ND 30. 37.3 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 5,37,75,748 3,27,21,959 81,8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f, 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 Splendor (G,H & L) 29-9-2006 Splendor (I,J & K) 1-12-2006 Splendor (M) & Glory (N & O) 31-3-2008 The AO noted that the assessee has got the O.C. for Spendor (I,J & K) on 1st Dec., 2006. Therefore, he asked the assessee as to why the profits of the Splendor (I, J & K) should not be offered for taxation in the current year. 39.2 In response to the same, the assessee replied as under : "1. The date for completion of the project Glory and Splendor (I, J, K and M) wings as certified by the Architect are enclosed at Annex. H along with the supporting documents thereto. In the architect certificate it has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 possession of these flats were handed over to the purchasers in the next year. Referring to the paper book pp. 317 to 319 he drew the attention of the Bench to the affidavit made by the Executive Director of the assessee company Mr. Sanjay Kashinath Haware wherein he has stated that the flats were handed over during financial year 2007-08 i.e. asst. yr. 2008-09. Accordingly, income in respect of I, J&K Wings of splendor project is correctly declared in the asst. yr. 2008-09. 40.1 He submitted that in the asst. yr. 2008-09, income in respect of the completed projects I, J&K Wings has been declared at Rs. 15,31,71,399 and in the asst. yr. 2009-10, the same is declared at Rs. 3,29,54,873. The learned counsel for the assessee subm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, 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 purchasers so as to negate the contention of the assessee. Further, the affidavit of the director has also not been rejected or proved to be false or untrue. Under these circumstances we find sufficient force in the submission of the learned counsel for the assessee that although the OC were obtained on 26th June, 2006 and 29th Sept., 2006, but the flats were completed in all respects according to the specifications and were handed over only after the end of the financial year 2006-07. Therefore, the assessee is right in recognizing the revenue in asst. yr. 2008-09. Further, we also find merit in the submission of the learned counsel for the assessee that since the assessee fulfils all the conditions prescribed under s. 80-IB(10), the entire profit ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee'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 flats were sold to the same person and hence the area of the two flats combined together exceeds 1,000 sq. ft., does not mean that the assessee is not eligible for claim under s. 80-IB(10). The assessee further submitted that it had not sold the two units as one consolidated unit, so as to deny it any deduction under s. 80-IB(10). It was submitted that some of the flats are exceeding 1,000 sq. ft. including terrace and in that areas of open terraces were not to be included in the built-up areas and the amendment regarding built-up areas was brought in by the Finance Act, 2004 w.e.f. 1st April, 2005 i.e. asst. yr. 2005-06. The assessee further contended that CIDCO authorities approved the project prior to the amendment of Finance Act which excluded balconies and terraces. The a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 AO relied on the following decisions : 1. Extempore Securities & Investments (P) Ltd. vs. Dy. CIT (2009) 29 SOT 40(Mumbai). 2. Miss P. Sarada vs. CIT (1998) 144 CTR (SC) 209 : (1998) 229 ITR 444 (SC) 3. Smt. Tarulata Shyam & Ors. vs. CIT 1977 CTR (SC) 275 : (1977) 108 ITR 345 (SC) 4. P.K. Badiani vs. CIT 1976 CTR (SC) 466 : (1976) 105 ITR 642 (SC) 5. S. Kumaraswamy vs. ITO (1961) 43 ITR 423(Mad). Accordingly the AO treated an amount of Rs. 8,01,97,900 as receipt of deemed dividend and assessed the same under the head income from other sources. 48.2 Before the learned CIT(A) it was submitted that the said transaction is of the nature of 'payment by way of loans and advances and it had specifically mentioned that the transactions are in the nature of ICDs paid to HEBPL during the year en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acts 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 (placed at paper book pp. 336 to 368) submitted that the same is for the purchase of premises and saleable built-up area of 1 lakh sq. ft. in the complex Haware City project for consideration of Rs. 35 crores. 49.1 Referring to the copy of the agreement dt. 23rd April, 2007 (placed at paper book pp. 369 to 398) entered into between the assessee company and HEBPL he submitted that the same is for purchase of ownership flats and saleable constructed area of 1 lakh sq. ft. in the building to be constructed at s. 36, Phase II, Navi Mumbai for a consideration of Rs. 30 crores. 49.2 He submitted that in view of the above agreements the assessee company during the year has received a sum of Rs. 8,01,97,900 from HEBPL towards constructed area agreed to be sold by them and similarly paid a sum of Rs. 9,55,44,000 to HEBPL towards constructed area pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 76 (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 was credit balance in their account from 1st April, 2006 to 6th May, 2006 and thereafter, it was always debit balance. That proves that from 6th May, 2006 onwards, the assessee company has first paid money to HEBPL and subsequent credits in their accounts are repayment of the loans given by the assessee company to HEBPL. He submitted that between 1st April, 2006 to 6th May, 2006, there are only four credit entries in the account of HEBPL which are as under : 15-4-2006 8,00,000 17-4-2006 10,00,000 25-4-2006 10,00,000 25-4-2006 10,00,000 Total 38,00,000 49.8 He submitted that if the opening credit balance of Rs. 1,50,35,750 is excluded the assessee company always gives money to Haware Engineers (P) Ltd. and thereafter, there is a repayment of the same and, therefore, such receipt of money against repayment of loan cannot be treated as deemed dividend. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herefore, it cannot be treated as deemed dividend in the hands of the assessee company. 49.11 He submitted that it is only Mrs. Ujjwala Haware who is the common shareholder of both the companies. As per the Special Bench decision in the case of Bhaumik Colour (P) Ltd. (supra) it has to be seen as to whether the loan given by Haware Engineers (P) Ltd. to the assessee company is used by Ujjwala Haware for her benefit or not. In this case, the assessee company has no loan or advance transactions with Smt. Ujjwala Haware. Referring to the decision of Hon'ble Supreme Court in the case of CIT vs. Mukundray K. Shah (2007) 209 CTR (SC) 97 : (2007) 290 ITR 433 (SC) he drew the attention of the Bench to the observations of the Hon'ble apex Court which are as under : "If it is proved that the loan payment made by company 'A' to company 'B' was not at all for the benefit of Mr. J. perhaps there will not be any case for addition under s. 2(22)(e) in the hands of Mr. J. In the identical case of CIT vs. Mukundray K. Shah (2007) 209 CTR (SC) 97: (2007) 290 ITR 433(SC) the assessee was a shareholder in company MKPTL, a private company, which paid Rs. 5.99 crores to the tw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bsp; 5,000 5,000 From the above, it is clear that the assessee is not a registered shareholder in HEBPL nor HEBPL is a registered shareholder in the assessee company. It has been held by the Special Bench of the Tribunal in the case of Bhaumik Colour (P) Ltd. (supra) 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 s. 2(22)(e) of the IT Act. Since the assessee succeeds on this proposition, the various other propositions argued by the learned counsel in our opinion do not require consideration. In this view of the matter, we set aside the order of the learned CIT(A) on this issue and direct the AO to delete the addition. 52. In the result, ITA No. 5601/Mum/2009 for assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X
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