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TMI Blog2021 (9) TMI 804X X X X Extracts X X X X X X X X Extracts X X X X ..... above, the land acquired by the company was duly reflected in the audited accounts of the company and as such the mere mention of name of the Directors in the Sale Deed does not lead the violation of sec.2(22)(e) and in view of the facts and in the circumstances it may be held accordingly. 3. Without prejudice to Ground No. 1 & 2 above, the amounted routed through the Directors/ Shareholders was mere business transaction and such it did not attract the provisions of sec.2(22)(e) and in view of the facts and in the circumstances it may be held accordingly . 4. For that your petitioner craves the right to put additional grounds and / or to alter / amend / modify the present grounds at the time of hearing. 3. Brief facts of the case as culled out from the records are that the assessee is an individual. Return of income for the A.Y 2014-15 filed on 24-03-2015 declaring total income of Rs. 14,60,370/-. Case selected for scrutiny through CASS followed by serving of notices issued u/s. 143(2) and 142(1) of the Act. On verification of individual transactions statement, the Ld. AO came to know that the assessee had purchased a property jointly with Sri Pijush Kanti Pal for a total cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contra, Ld. Departmental Representative vehemently argued supporting the finding of the ld. CIT(A) as under:- "9. I have carefully considered the facts of the case. The bare facts which emerge from the above discussions are that two of the Directors, including the appellant, are substantially interested in the Private Limited Company called Spandan Healthcare Private Limited, holding around 16% of its share. The said two Directors purchased landed property during the year under consideration in their individual names. They continue to hold the legal title on that land in their individual capacities. For purchasing this land, payment was made by the Private Limited Company in which these two Directors were substantially interested. 10. What catches my attention is that the land was purchased individually by the two Directors of the company and that the legal title on the said land had remained with them even though the payments were made by the private limited company. One may argue that since the land as a fixed asset is reflected in the accounts of the private limited company which also has made the payments from its own accounts and since the Directors have not claimed the la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 1,56,83,132/- (inclusive of stamp duty). Share of assessee is of Rs. 78,41,566/-. The payment for total purchase consideration was made by the company, M/s. SDCPL in which the assessee is a director. Since the property was in the name of assessee, the ld. AO treated the alleged sum as loan given by the said company to its director, thereby invoking the provisions of section 2(22)( e ) of the Act. Further, the ld. CIT(A) also confirmed the view taken by the ld. AO, mainly focussing on the legal title of the land in question for taking the view that the payment for purchase of land by M/s. SDCPL was indirect way of paying the consideration on behalf of its director and the ld. CIT(A) accordingly held this transaction to come within the ambit of section 2(22) ( e ) of the Act. 9. Before proceeding, we will first go through the provisions of section 2(22) ( e ) of the Act, which reads as under:- (a) to (d).... .... .... .... .... .... .... ... ... (e) any payment by a company, not being a company in which the public are substantially interested, of any sum (whether as representing a part of the assets of the company or otherwise) made after the 31st day of May, 1987, by way of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of distribution or payment referred to in those subclauses, and in subclause (c) shall include all profits of the company up to the date of liquidation, but shall not, where the liquidation is consequent on the compulsory acquisition of its undertaking by the Government or a corporation owned or controlled by the Government under any law for the time being in force, include any profits of the company prior to three successive previous years immediately preceding the previous year in which such acquisition took place. Explanation 2A.-In the case of an amalgamated company, the accumulated profits, whether capitalised or not, or loss, as the case may be, shall be increased by the accumulated profits, whether capitalised or not, of the amalgamating company on the date of amalgamation. Explanation 3.-For the purposes of this clause,- (a) "concern" means a Hindu undivided family, or a firm or an association of persons or a body of individuals or a company ; (b) a person shall be deemed to have a substantial interest in a concern, other than a company, if he is, at any time during the previous year, beneficially entitled to not less than twenty per cent of the income of such conc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transaction is for company's own business and commercial expediency, there was no reason to invoke the provisions of section 2(22)( e) of the Act. Our view is duly supported by the decision of the co-ordinate bench of ITAT, Mumbai in the case of Smt.Jenobia Adi Doctor Vs. ITO, W-15(3)(1), Mumbai, order dt. 23-07- 2019, wherein Tribunal has observed as follows:- "4. We have heard the rival contentions and gone through the facts and circumstances of the case. We noted the facts that Vision Marketing & Information Services Pvt. Ltd along with Mr. Percy Adi Doctor jointly purchased Flat No. 203 in Godrej Platinum project, each having 50% share therein. However, by a Board resolution passed on 01.12.2011, it was decided that the assessee, who is a Director in Vision Marketing & Information Services Pvt. Ltd., would hold this property in her individual name, but for and on behalf of the company since the company was advised that in a eooperative society structure, a corporate body cannot be a joint member along with another individual. Thus, 50% share in this property always belonged to the company, Vision Marketing & Information Services Pvt. Ltd. though it was purchased in the indiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iled before the AO. It may be noted that the submission was filed before the AO on 10.03.2016, where this certified copy is attached. This certified copy was obtained a day before and again there is a typographical error in that the year is typed as '2015" instead of '2016". But it may be appreciated that this type of error keep happening in the early part of a new year when the people mistakenly type or write the immediately preceding year as a habit until they are used to the new year. Thus, Board Resolution is the most crucial and clinching evidence to show that it is the Company that is the beneficial owner of this properly and not the assessee, who merely holds the same in her name for and on behalf of the Company, being a Director of the Company. The Board Resolution coupled with the entries in the books of account and Balance Sheets as at 31.3.2012 and 31.03.2013 constitute the clinching evidence to show that the said property really belongs to the Company and the assessee merely held the same for and on behalf of the Company. 7. In view of the above facts clearly spell out that the property does not belong to the assessee and where the property does not belong to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , wherein the Tribunal held that provisions of section 2(22)( e) of the Act did not apply to advances made by the company to the assessee, who was the Managing Director thereof and also holding substantial interest therein, to acquire land in his name for the purpose of development by the company so as to reduce the incidence of stamp duty on the ultimate sale of flats to the customers. The Tribunal held that the company advanced money to the MD out of commercial expediency to reduce the cost and be more competitive, and therefore it was clearly motivated by business exigencies, and that did not amount to loan or advance within the meaning of section 2(22)(e ) of the Act. In view of above, we are of the view that this addition cannot be sustained hence, we delete the addition made by AO and confirmed by Commissioner of Income Tax (Appeals). 10. In the result, the appeal of the assessee is allowed." 12. In view of the above facts and circumstances as well as respectfully following the decision of the Tribunal, we are of the considered view that in the instant case since no land/advance was given to the assessee from the said company, in which the asessee is a director and, theref ..... X X X X Extracts X X X X X X X X Extracts X X X X
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