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2016 (4) TMI 344 - ITAT JAIPUR

2016 (4) TMI 344 - ITAT JAIPUR - TMI - Deemed dividend u/s 2(22)(e) - whether the advances were loan for business purposes or otherwise - Held that:- The prima facie copy of accounts in the books of the company shows that assessee had paid much more than amount received from the company. The transactions were regular. The assessee produced the evidence before the lower authorities to justify the transaction as a business transaction on the basis of agreement to sale dated 22.7.2009. There were c .....

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but in final Master Plan this area has been reduced to 10 hectares. The assessee filed application on 23.08.2012 under section 90B of the Land Revenue Act before the JDA which was rejected by the JDA. The case laws relied on by the ld. A/R are squarely applicable on the facts of the case. Therefore, we hold that transactions made by the assessee and the company are for business purposes and are not deemed dividend under section 2(22)(e) of the Act. - Decided in favour of assessee - ITA No. 810/ .....

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94/- made by ld. AO on account of deemed dividend by applying the provisions of section 2(22)(e) of Income Tax Act more so when the payment by M/s. Ashish Buildcon Private Ltd. to the assessee was not in the nature of loans and advances but advance against the sale of the land to the company in the normal course of the business. 2. That the order of the ld. CIT (A), confirming the addition made by the AO is arbitrary, whimsical, capricious, perverse and against the law and facts of the case. The .....

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ector in company M/s. Ashish Buildcon Pvt. Ltd. The assessee is having shareholding more than 10% in the said company. It is noticed that assessee company had paid ₹ 1,22,55,000/- as advance to the assessee in the current account through which day to day transactions were being carried out. The assessee was having accumulated reserve and surplus to the tune of ₹ 99,50,794/-. The AO further observed that M/s. Ashish Buildcon Pvt. Ltd is not a company in which the publics are substanti .....

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to day to day transactions between a company and a shareholder. He further relied on Hon ble Supreme Court decision in the case of Miss P Sarda vs. CIT, 229 ITR 444 (SC) on deemed dividend. He further relied on in the case of Shyama Charan Gupta vs. CIT, 337 ITR 511 (All) wherein it has been held that amount paid by the company to assessee holding more than 10% shareholding was shown as advance commission payment is deemed dividend since on the date of payment the company did not have any liabi .....

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usiness premises of the appellant along with that of company on 22.09.2010. The ld. A/R of the appellant furnished an unregistered Agreement to Sale dated 22.07.2009 between the appellant and the company. It has been submitted that this money was advanced in the normal course of business by company as per the said agreement to sale because it has been given by the company to the appellant as an advance for purchase of land. She held this agreement to sale as unreliable evidence due to it being n .....

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istration. She also considered clause (4) of the Agreement to Sale wherein it has been provided that if assessee could not get 90B approval by 15.03.2010, then this Agreement to Sale would be deemed to be cancelled and these amounts will be returned back. The ld. CIT (A) presumed that the Ikrarnama was cancelled because sanction under section 90B could not be obtained by Shri Ashok Kumar Agarwal, the seller by 15.03.2010. She also asked the appellant to supply any correspondence undertaken by th .....

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Director of the company knew very well that the use of land was not going to be converted under 90B by 15.03.2010, to that extent this Ikrarnama is void ab-initio. She held that Ikrarnama is nothing but an after thought to justify the loans taken by him from the company as advances for land to escape the deeming provisions of sec. 2(22)(e) of the Act. The return of the company M/s. Ashish Buildcon Pvt. Ltd. was electronically filed on 21.09.2010 i.e. one day prior to the search. In the Notes to .....

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vances recoverable in cash or in kind for which value was still to be received. She has reproduced the Schedule-7 at page 10 of her order. Thus in the return filed by the company a day prior to the search, the transactions as per the Ikrarnama had not been reflected by the company either by way of inclusion of this land in its stock or as an advance recoverable in cash or kind. She relied on the evidences by way of return of the company to hold that the Ikrarnama furnished by the appellant is un .....

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ld. A/R of Hon ble Delhi High Court in the case of CIT vs. Creative Dyeing and Printing Pvt. Ltd. ITA No. 250/2009 dated 22.09.2010 and the order of the Income Tax Settlement Commission in the case of M/s. Career Point Infosystems Ltd., Shri Pramod Kumar Maheshwari, Shri Om Prakash Maheshwari and Shri Naval Kishore Maheshwari (S.A.No.RJ/JP 51/2011-12/28 to 31-IT). After examining these orders, she held that case laws referred by the assessee are completely distinguishable from the facts of the .....

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Agreement to Sale of land. When the 90B proceedings could not be got from JDA, the agreement was cancelled and amount was refunded to the company. The assessee is a regular dealer in the land and company is also dealer in the land. The advance transaction is normal business transaction and same cannot be treated as a deemed dividend. He also relied upon Hon ble Delhi High Court decision in case of CIT vs. Creative Dyeing and Printing Pvt Ltd. (supra) before the AO. The ld. A/R also filed copy of .....

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course of business both the persons are receiving advances from the customers and thereafter selling the plots to them. Therefore, this is a general practice of the trade to first receive advances from the customers and thereafter sell the plots/land to them. Since the land under the Agreement to Sale could not be got approved for the purpose of 90B formalities, the agreement was cancelled and amount was refunded to the company. But later on another land was sold to the company by the assessee .....

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njunction with the word loan . Usually attributes of a loan are that it involves the positive act of lending, coupled with acceptance by the other side of the money as loan. It generally carries interest and there is an obligation of repayment. On the other hand, in its widest meaning the term advance may or may not be proved lending, for which he relied on the decision of Hon ble Delhi High Court in the case of CIT vs. Raj Kumar, 318 ITR 462 (Delhi). Further he relied on the following decisions .....

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The ld. CIT (A) observed that assesee s agreement was unregistered and after thought, has no basis as in this line of business all the land transactions are generally made on agreement to sale to save the stamp duty and increase the profitability on that transaction. Besides this, numbers of formalities are required to be completed to get registry in the name of purchaser. Further, it was observed that during the course of search Agreement to Sale was not found, it is submitted by the ld. A/R t .....

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is limit was further reduced to 10 hectares. The ld. A/R referred the Draft Master Plan approved by the JDA and argued that this was the reason for not getting the 90B approval. When land had not got registered in the name of the company, therefore, it could not be included in the closing stock of the company. The balance as on 31.03.2010 was Nil, therefore, this amount has also not been reflected under the head Advance recoverable in cash or in kind. The case law referred by the ld. CIT (A) are .....

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. The peak debit balance in the name of assessee in the books of account of the company was ₹ 91.90 lakhs on 10.02.2010. Whereas the ld AO made addition of ₹ 99,50,794/- which is also not justifiable. Accordingly he requested to delete the addition. 5.3. At the outset, the ld. D/R vehemently supported the order of ld. CIT (A) and argued that ld. CIT (A) had discussed and given the finding in this issue in detail after considering each and every aspect on facts and law, therefore, sam .....

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09 again he paid ₹ 2 lakhs to company, ₹ 9.5 lakhs on 28.07.2009, ₹ 3 lakhs on 13.10.2009, ₹ 1.25 lakhs on 15.10.2009, ₹ 5 lakhs on 26.10.2009, ₹ 5 lakhs on 29.10.2009, ₹ 20 lakhs on 10.02.2010 and ₹ 60 lakhs on 10.3.2010 (Rs. 20 lakhs each) and ₹ 13 lakhs on 10.03.2010 and ₹ 1.25 lakhs on 10.3.2010 which show that there are numbers of transactions between the assessee and company. Finally, the assessee s accounts has been squared up. T .....

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