TMI Blog2020 (4) TMI 851X X X X Extracts X X X X X X X X Extracts X X X X ..... the head house property - assessee is owner of the land and building used by the company towards its business purposes - HELD THAT:- Annual value of property, i.e. the income arising from the house property, has to be assessed to tax u/s.s 22 to 27 of the Income Tax Act. The AO has based the rental income received by the assessee in the immediately succeeding year, as the sum for which the property might reasonably be expected to let from year to year and particularly for this assessment year. On which, the assessee has not placed any material to hold that the amount assessed by the AO is unreasonable. - Decided in favour of revenue - I.T.A. No. 883/Chny/2019 - - - Dated:- 25-2-2020 - Shri N.R.S. Ganesan, Judicial Member And Shri S. Jayaraman, Accountant Member For the Appellant : Shri. AR.V. Sreenivasan, JCIT For the Respondent : Shri. M. Karunakaran, Advocate ORDER PER S. JAYARAMAN, ACCOUNTANT MEMBER: The Revenue filed this appeal against the order of the Commissioner of Income Tax (Appeals) 7, Chennai in ITA No. 132/CIT(A)-7/2016-17 dated 30.01.2019 for assessment year 2014-15. 2. Shri. Jethanand Thakur Bakshani, the assessee, an individual a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The CIT(A) relied on the jurisdictional tribunal's decision in the case of G Sreevidya, Chennai vs Department of lncome tax dated 23.05.2015 and deleted the addition made uls.2(22)(e) of the Act, where as the facts of the case are distinguishable. 4. The latest decision of the Hon'ble High Court of Delhi in the case of Vikram Krishnan vsPr.ClT, in ITA No.21712019 dated 06.03.2019, which is in favour of revenue and the facts are similar to the instant case. 5. The CIT(A) failed to consider the fact that there is no necessity to purchase a land and building which was already in their possession. 6. The CIT(A) failed to consider the fact that the AO has specifically stated in the assessment order that the documents produced in support of his claim, shows lack of genuineness. Further the assessee failed to give the adequate evidence and cogent, reliable and credible evidences even at the time of appellate proceedings. 7. The CIT(A) ought to have appreciated the fact the agreement to sell and cancellation of such deed by agreement for the purchase of property is merely cover up and a camouflage for giving advance to the assessee by the company to avoid the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rastructure in the production facilities, in the said Factory building by installation of additional new Plant and Machines of latest state of art technology to improve the capacity, output and turnover leading to growth and development. Accordingly, the BNT connections Impex Ltd obtained the approval of Board of Directors and its shareholders and entered into Sale Agreement dated 31/03/2012 with BNT connections for purchase of the said factory Land and Building which has the best infrastructure for manufacture of garments. It was also agreed between the parties that the sale would be completed within a period of three years. The management finalised the sale consideration at Market Value, considering the locations of the properties, the facilities available, prevailing rates in the area and fixed the sale consideration as ₹ 10,00,00,000/- . Furtherance to the sale agreement, the company has paid Rs.₹ 3,76,00,000 from fy 2011-12 to fy 2013-14. The assessee has shown the amount received from the company as Property Advance and even in the books of the company the amount paid by the company to the assessee is shown under the group Loans and Advances being property pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that in order to attract and retain skilled labour, which was imperative to improve efficiency and output, and to reduce its overheads, it was necessary to shift the entire manufacturing operations out of Chennai and in particular to A P . 3.4 Further in overall interest in company s business operations, the management considered various options including shifting the manufacturing operations to Andhra Pradesh. The state of Andhra Pradesh offered various advantages about which the ld AR invited were our attention to the relevant portion of the order of the ld CIT(A) and continued her submissions stating that BNT Connections Impex Ltd, further planned to consolidate its operations at one location to have a better control over production and productivity, which would result in a reduction in its overheads. The Management estimated that the above advantages would result in a reduction in manufacturing costs significantly, by 20-30%, thereby leading to substantial cost savings for the company. Therefore , the Company has started looking for properties outside Chennai particularly in A P for its business needs and ultimately found a property in Ekatallur Village, Chittore District ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0,000/- . 4. With regard to the addition made under the head house property, the Ld. AR submitted that the assessee has let out the property to the company only from 2014 after cancellation of the sale agreement and after return of the entire advance paid by the company and not earlier. The assessment year involved is 2014-15 and during this year the property was not let out by the assessee to the company nor any rent was received by the assessee from the company. Therefore, according to the assessee, the assessing officer was not justified in assessing properly income on presumptive basis. The Ld. CIT(A) held that the AO appeared to have overlooked the fact that the assessee had agreed to sell the said property to the company and received advance for sale of the property also from the company. Further, the assessee had already sold all his business assets including the plant and machinery to the company much earlier and the company was using those assets for its business purposes. The company has paid a total advance of ₹ 4.45 cr. for purchase of property from the assessee and the assessee allowed the company to use the premises also as he has received interest free ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... res This is evident from the statement of Turnover and Profit or loss submitted by the assessee in the written submission. Therefore it is proved beyond reasonable doubt that the property advance of ₹ 2.31 crores paid by the company to the appellant is purely business and commercial transaction and hence the provisions of section 2(22)(e) cannot be invoked for such business and commercial transaction as per CBDT Board Circular No 19/2017. Even otherwise this particular Business and commercial transaction is beyond the scope of section 2(22)(e) as per the Income tax Act, 1961. As a result of such transaction substantial benefit has only accrued to the company and not to the Individual benefit of the shareholder ( appellant). The appellant also drew my attention to the fact that the appellant has right from the inception of the company always funded the company by way of unsecured loan without interest thereon, whenever the company required funds for its business operations. A statement of unsecured loan given by the appellant to the company was enclosed for perusal to this effect. The appellant also enclosed the letter received from the Federal Bank on 07/05/2014 whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for personal purposes against the personal guarantee and the collateral security given by her to facilitate her availing of credit facility of the company. It is a well settled law that loan or advance given to a shareholder by a company in which public is not substantially interested and which had accumulated profits, the amount advanced as loan to such shareholder is deemed to be dividend as per the provisions of section 2(22)(e) of the Act. However, the facts and circumstances of each case have to be scrutinized before applying the ratio of the cases holding above well settled law. In the facts and circumstances of the instant case, judgements relied upon by the DR in the cases of Sarada P.(supra), P.K.Abubucker (supra) and Trarulata Shyam (supra) are not applicable. The Commissioner of Income Tax (Appeals) vide order dated 6.4.2011 has rightly deleted the addition made on account of deemed dividend by the Assessing Officer. We do not find any infirmity in the order passed by the Commissioner of Income-tax(Appeals). In view of aforesaid findings, the appeal of the Revenue falls and the same is dismissed being devoid of any merit. Therefore the assessing o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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