Tax Management India. Com
                        Law and Practice: A Digital eBook ...

Short Notes

TMI - Tax Management India. Com
Case Laws Acts Notifications Circulars Classification Forms Manuals SMS News Articles
Highlights
D. Forum
What's New

Share:      

        Home        
 

TMI Blog

Home List
← Previous Next →

2017 (11) TMI 1840

itted 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 .....

X X X X X X X

Full Text of the Document

X X X X X X X

MAHARISHI, ACCOUNTANT MEMBER For the Assessee : Shri K Sampath, Adv For the Revenue : Shri RC Pandey, Sr. DR ORDER PER PRASHANT MAHARISHI, A. M. 1. This appeal is filed by the Assessing Officer in ITA No. 1245/Del/2016 for Assessment Year 2008-09 against the order of the ld CIT (A)-XIV, New Delhi who vide order dated 15.10.2015 deleted the addition of ₹ 98 lakhs relying upon the decision of the Hon'ble Delhi High Court, which the ld Assessing Officer treated as deemed dividend u/s 2(22) (e) of the Income Tax Act, 1961. The revenue has raised the following grounds of appeal:- 1. On the facts and in the circumstances of the case and in law, the ld CIT(A) has erred in deleting the addition made by the AO amounting to ₹ 9800000/- u/s 2(22)(e) of the Act, 1961. 2. On the facts and in the circumstances of the case and in law, the ld CIT(A) was not justified in reversing the AO s rejection as claimed by the regarding advance of ₹ 9800000/- received from M/s. Competent Holdings Ltd. 2. The brief facts of the case are that the assessee is an individual who filed his return of income of ₹ 5363400/- on 11.09.2008. During the appellate proceedings for Assessment Yea .....

X X X X X X X

Full Text of the Document

X X X X X X X

is claim. He also submitted the copy of Memorandum of Understanding dated 01.09.2008 on this issue. In view of this he submitted that above transaction is a commercial transaction which does not fall within the ambit of the advance u/s 2(22)(e) of the Act. He further referred to the latest circular issued by CBDT dated 12.06.2017 wherein, the revenue has accepted that trade advances are not covered in the ambit of deemed dividend. 5. The ld Departmental Representative vehemently contested the claim of the assessee and supported the orders of the lower authorities. He specifically referred to the decision of the Hon'ble Supreme Court in case of PK Badiyani Vs. CIT 105 ITR 642 and of Hon'ble Delhi High Court in case of CIT Vs. Sunil Chopra 242 CTR 498 (Delhi). 6. We have carefully considered the rival contentions and perused the orders of the lower authorities. The brief facts in the present case are that assessee is a director with 36.30 % shareholding in the company M/s competent Holdings private limited. Both the assessee as well as that company is having one of the main business activities of real estate business. The assessee entered into an Agreement to Sale on 09/01/20 .....

X X X X X X X

Full Text of the Document

X X X X X X X

2/06/2017 as under :- SECTION 2(22) OF THE INCOME-TAX ACT, 1961 - DEEMED DIVIDEND - CBDT'S CLARIFICATIONS ON SETTLED VIEW OF SECTION 2(22)(e) OF SAID ACT ON TRADE ADVANCES/COMMERCIAL TRANSACTIONS CIRCULAR NO.19/2017 [F.NO.279/MISC./140/2015/ITJ], DATED 12-6-017 Section 2(22) clause (e) of the Income-tax Act, 196) (the Act) provides that "dividend" includes any payment by a company, not being a company in which the public are substantially interested, of any sum by way of advance or loan to a shareholder, being a person who is the beneficial owner of shares (not being shares entitled to a fixed rate of dividend whether with or without a right to participate in profits holding not less than ten per cent of the voting power, or to any concern in which such shareholder is a member or a partner and in which he has a substantial interest (hereafter in this clause referred to as the said concern) or any payment by any such company on behalf, or for the individual benefit, of any such shareholder, to the extent to which the company in either case possesses accumulated profits. 2. The Board has observed that some Courts in the recent past have held that trade advances in the n .....

X X X X X X X

Full Text of the Document

X X X X X X X

y has made certain payments. The agreement was entered into w.e.f. 09/1/2008 between the assessee and M/S competent Holdings Ltd and therefore from this date commercial transaction between the two parties has started. The assessee has been paid a sum of ₹ 5 Lacs on 9/1/2008. Therefore, this sum cannot be treated as deemed dividend in the hands of the assessee. Further, up to 31st of January 2008 the assessee was to be paid a sum of ₹ 70 lakhs. Therefore, this sum also becomes the trade advance by the company to the assessee. However Before us, The 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 .....

X X X X X X X

Full Text of the Document

X X X X X X X

ated 23/11/2012, wherein the addition of ₹ 37 lakhs in the hands of the assessee on account of the deemed dividend under section 2 (22) (e) is confirmed. Assessee in its appeal has raised following grounds of appeal:- That on the facts and in the circumstances of the case and in law, the authorities below erred in invoking section 2(22)(e) of the Income Tax Act to add in a sum of ₹ 37 lakhs to the returned income which being erroneous and illegal must be quashed. 10. The facts relating to this appeal are that assessee has credit of loan of ₹ 1.35 crores during the year, comprising of ₹ 98 lakhs as opening balance and ₹ 37 lakhs during the year. The assessee has also repaid ₹ 75 Lacs to the company. The Ld. assessing officer treated the sum of ₹ 37 lakhs as deemed dividend under section 2 (22) (e). The assessee aggrieved with the order of the Ld. assessing officer preferred an appeal before the Ld. CIT (A) who confirmed the above sum. Therefore, now assessee is in appeal before us. 11. The contention of the Ld. authorized representative remained the same that above transactions are commercial transactions in nature and therefore they are not .....

X X X X X X X

Full Text of the Document

X X X X X X X

 

 

← Previous Next →

 

 

|| Home || About us || Feedback || Contact us || Disclaimer || Terms of Use || Privacy Policy || Database || Members || Refer Us ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.
|| Blog || Site Map - Recent || Site Map ||