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2019 (7) TMI 666

ecurity was disproportionate in respect of land holding and not mentioned in Balance Sheet of company - HELD THAT:- In the case in hand, the assessee have established that there is a contractual relationship of lessor and lessee with the company, the land rented out is a high value land , the rent paid by the company has been returned in the income tax returns of the lessors and duly accepted by the Department, there is no question to doubt the payment of security deposits also. The assessee, thus, have proved that it was commercial transaction between the assessee and the company, hence, the deeming fiction of deemed dividend as per the provisions of section 2(22(e) cannot be applied in this case. DR said that the amount paid as security deposits to different assessee is disproportionate vis-a vis to the share of the assessee in property in question, it is undisputed that the assessee herein are family members and the total security deposits paid by the company to the assessee never exceeded the limit as stipulated in the lease agreement. It is up to the assessee to settle between them as to in which assessment year what amount of the security deposit will be retained by either or .....

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ort 'the Act') treating the amount received by the individual assessees from the company namely M/s VTC Transport Pvt. Ltd. (in short VTC Limited ) as deemed dividend. 3. Briefly stated, the facts of the case are that the appellant-assessees are substantial shareholders in VTC Limited. A search and seizure operation was conducted on 30.6.2010 in the VTC group of cases. The assessees / appellants named above were also covered in the search action. Pursuant to the search action, the assessees were called upon to file the returns of income for preceding six assessment years relevant to the previous year in which search was conducted. Accordingly, the assessment u/s 153 A of the Act was made by the Assessing Officer for assessment years 2005-06 to 2010-11. During the assessment proceedings, the Assessing Officer observed that the assessees / appellants had taken hefty loans and advances from M/s VTC Transport Pvt. Ltd. That the assessees had substantial shareholding in VTC Limited . He further observed that the said company VTC Limited had huge accumulated profits in the form of reserves and surpluses. When called upon to explain as to why the aforesaid loans and advances be no .....

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as deemed dividend u/s 2(22)(e) of the Act. 5. Being aggrieved by the above additions made by the CIT(A), the assessees preferred appeals for different assessment years before this Tribunal. The additions relating to the assessment year 2005-06 to 2008-09 stood deleted by a separate common order of this Tribunal dated 28.11.2016 passed in ITA Nos. 927 to 930/Chd/2014 and others on the legal ground that no incriminating material was found during the search action and that the original assessments already stood completed on the date of search, by following the decision of the co-ordinate Bench of the Tribunal in the case of M/s Mala Builders Pvt. Ltd vs ACIT in ITA Nos. 433 to 437/Chd/2014 & Others. 6. Now, the captioned appeals are relating to remaining assessment years 2009-10 to 2011-12, challenging the aforesaid confirmation of additions on merits. 7. We have heard the rival contentions and have also gone through the material available on record. The Ld. Counsel for the assessees has reiterated the submissions as were made before the lower authorities and further submitted that the lower authorities have wrongly treated the amount of security deposits received by the assessee .....

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Counsel in this respect has also relied upon the CBDT Circular No. 19 of 2017 dated 12.6.2017, wherein, the CBDT has observed that the trade advances which are in the nature of commercial transactions would not fall within the ambit of the word advance in section 2(22)(e) of the Act. It has been directed in the said circular that appeals may not be filed on this ground by officers of the Department and those are already filed in Courts / Tribunals, may be withdrawn / not pressed. Apart from that, the Ld. Counsel in this respect has relied upon the following decisions:- 1. Mukundray K Shah vs CIT 277 ITR 128 CAL-HC 2. CIT vs Ambassador Travels(P) Ltd. 318 ITR 376 DEL-HC 3. CIT vs Raj Kumar 318 ITR 462 DEL-HC 4. CIT vs Parle Plastics Ltd 332 ITR 63 HC of Bombay at Goa 5. DCIT vs Lakra Brothers 106 TTJ 250 CHD-ITAT 6. Shital Kumar Vij vs ACIT ITA No. 405/Chd/2009, ITAT Amritsar Bench, Amritsar. 7. DCIT vs Chariot International (P) Ltd 29 ITR (Trib) 36 Bang-ITAT 8. CIT vs Francis Wacziarg 353 ITR 187 DELHI-High Court 9. CIT vs Madurai Chettiyar Karthikeyan 223 Taxman 350 MAD-High Court 10. Bagmane Constructions (P) Ltd vs CIT 277 CTR 338 KAR High Court 11. Jinendra Kumar Jain vs ACIT .....

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s in question was purchased from Himachal Pradesh for some other purpose. Since the validity of the said stamp paper had not expired, hence, the same was used for execution of the lease deed in question. That said agreement in question has been duly notarized and the same has been acted upon by the parties. The rent paid by the company as per agreement has been reflected in the returns of income of the assessees and assessed as such by the Debarment. That on the basis of the same agreement, the Department has accepted the rental income and there was no question to doubt the receipt of the security deposits. He, therefore, has submitted that the payment to the assessees by the companies was purely a business transaction and cannot be assessed as deemed dividend income in the hands of the assessees. 11. We have considered the rival submissions have also gone through the record. Admittedly, the assessees before us are the co-owners in the land / premises which has been used by the company VTC Limited Ltd for its business of transportation and allied business. The assessees have substantial interest in the company. The Company VTC Limited has sufficient reserves and surpluses during th .....

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ees otherwise are major shareholders in the company and, hence, they are also interested in the growth of the company, hence, the clause relating to the security deposits from the company was not strictly implemented so as to make available the appropriate funds to the company for its business purposes. However, that does not mean that the assessees would not be entitled to take any security deposits from the company. The land used by the company is a commercial high value land, hence, as per the normal business practice, the lessors can press upon the lessee to make appropriate security deposits. That this was not unusual in the case of assessees also. There is no rebuttal to the argument of the counsel for the assessees that the security deposits in question never crossed the amount payable as security deposits as per the terms of the lease agreement. So far as the contention of the Ld. DR that the Stamp paper upon which the lease agreement was executed was purchased from Himachal Pradesh, whereas, the assessees do not have any business office in Himachal Pradesh is concerned, the counsel for the assessees has explained that it was the old stamp paper used which was lying with th .....

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ar u/s 54 of The Indian Stamp Act, 1899 to use an old stamp paper may be purchased beyond the period of six months, however, even otherwise also, if as per section 54 of The Indian Stamp Act, the period of six months for return of the stamp papers is taken as a period of validity of stamp paper, the assessees under bonafide belief and usual practice have used the stamp papers within the period of six months thinking it to be a valid for execution of the lease agreement in question. The purpose of execution of an agreement on stamp paper is to pay the stamp duty to the Government. The assessees were having a stamp paper in their possession which was not a very old stamp paper and used within the period of six months from the date of its purchase under normal circumstances. In view of this, though, the use of old stamp paper may cast some doubt about on the authenticity of the agreement, however, the same is not determinative or conclusive to hold that agreement in question was not authentic. As discussed above, since the stamp paper in question has been used within six months from the date of its purchase, hence, the bonfide of the assessees to use the said stamp paper being a valid .....

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ned by the statutory provisions of the Transfer of Property Act. It can be gathered otherwise from the act and conduct of the parties whether that there was a relationship of lessor or lessee or not. In the case in hand, neither the VTC Limited nor the assessees have denied or disputed their relationship as a lessor and lessee, rather, it has also not been disputed by the Revenue that the VTC Limited is using premises of the assessees and has been paying rent to the assessees which has been duly taken into the account in the returns of the income of the assessees and due taxes paid thereupon and also accepted as such by the Department. As per the provisions of section 49 of the Registration Act, no document required to be registered shall be received as evidence of any transaction affecting such property or conferring such power unless it has been registered. However, as per the provision of section 49 of the Act, unregistered documents can be received as an evidence of the collateral transactions not required to be affected by registered instrument. In the case in hand, there is no dispute between the parties to lease deed regarding terms and conditions of the lease. The nature of .....

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year 2009-10, apart from the common ground of deemed dividend, another ground agitating the additions made / confirmed by the lower authorities u/s 68 of the I.T. Act has also been taken which reads as under:- 2. That the learned Commissioner Of Income Tax (Appeals) has erred in law and facts in confirming the addition of ₹ 64,2,5000/- being entire cash deposited in the bank account, as income u/s 68 of the Income Tax Act. The fact is that assessee has submitted detailed cash flow statement, as well as Statement of Affair of each year to learned AO. Even statement showing date wise availability of cash in hand of each year was submitted to learned CIT (Appeal). As such the confirmation of addition by the Ld. CIT(Appeals) is factually and legally not correct. 18. The brief facts relating to the issue are that during the assessment proceedings, the Assessing Officer from the perusal of the bank account of the assessee noted that there were cash deposits on different dates totaling ₹ 64,25,000/- during the year under consideration. He, therefore, show caused the assessee to explain the source of the aforesaid deposits of ₹ 64,25,000/- deposited on different dates. T .....

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