TMI Blog2015 (6) TMI 1242X X X X Extracts X X X X X X X X Extracts X X X X ..... R common share holders having more than 20% share holding in the assessee company and M/s Precision Stock and Credit Pvt. Ltd. which was having an accumulated profits - HELD THAT:- Assessee who was engaged in the real estate business received an advance against the sale of land, therefore it was in the nature of business transaction - the assessee company is not the shareholder in M/s Precision Stock Credit Pvt. Ltd. and received the amount from the said company in the course of ordinary business activities. Therefore the provisions of section 2(22)(e) of the Act were not applicable. We, therefore, by considering the totality of the facts deem it appropriate to delete the impugned addition made by the AO and sustained by the Ld. CIT. - Decided in favour of assessee. - ITA No. 5383/DEL/2010 - - - Dated:- 12-6-2015 - Shri G.C. Gupta, Hon ble Vice President And Shri N.K. Saini, Accountant Member For the Appellant : Sh. Ved Jain, Adv., Smt. Rano Jain, CA. For the Respondent : Smt. Parminder Kaur, Sr. Dr.. ORDER Per N.K. Saini, A. M. : 1. This is an appeal by the Assessee against the order dated 30/09/2010 of CIT(A)-XV, New Delhi. 2. Fol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Singh. The AO asked the assessee to furnish the confirmation and the sources of investment made by the above mentioned two share holders. He also asked to produce the aforesaid persons to verify the veracity of the transactions. In response the assessee produced both the persons on 5.12.2008. The AO observed that Shri Jasbir Singh was able to substantiate his sources of investment from sale proceeds of agricultural land but Shri Vinod Kumar could not do so. The AO further observed that the statement of Shri Vinod Kumar was also recorded in which he explained that he made the investment out of his past savings from agricultural activities and out of refund of cash loan given to Shri Jasbir Singh alias Pappu. Shri Vinod Kumar in his statement also stated that he owned approximately 40 bighas of land, however, papers were not available with him since those were mortgaged in connection with a tractor loan. The AO observed that Shri Vinod Kumar could not explain the exigency under which he had to apply for bank loan specially when a sum of Rs. 10,00,000/- in cash was available with him. He further observed that copy of the Khasra Khatoni of agricultural land at Village Nathupur the na ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6. CIT vs. Sumati Dayal 214 ITR 801 (SC) 7. CIT vs. Value Capital Services Pvt. Ltd. 307 ITR 334 (Del) 7. The Ld. CIT(A) after considering the submissions of the assessee observed that Shri Vinod Kumar was not assessed to tax and did not have a PAN. He further observed that Shri Vinod Kumar could not produce any evidence with regard to the source of income for his creditworthiness and that the mode of payment regarding his claim of agricultural income was not furnished before the AO. The ld. C.I.T.(A) also observed that the assessee could not submit either the copy of Khasra, Khatauni or any receipt of agricultural produce and that the genuineness of the transaction was in doubt since the payment was not made through banking channel but was made in cash. The Ld. CIT(A) also mentioned that the case laws relied by the assessee were not applicable to the present case. Accordingly the addition made by the AO on account of share capital of Rs. 10 lac received from Sh. Vinod Kumar was sustained. Now, the assessee is in appeal. 8. The Ld. Counsel for the assessee reiterated the submissions made before the authorities below and further submitted that the assessee furnish ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of land. It is also noticed that the assessee furnished copies of J froms in the name of Shri Vinod Kumar which clearly established that he sold the agricultural produce to M/s. Rameshwer Dayal Prem Chand Aadhti, Sonepat Mandi, copies of the same are placed at page no. 37 to 43 of the assessee s paper book. In the present case, it is noticed that the assessee received a sum of Rs. 5,00,000/- from Shri Jasbir Singh to whom the said amount was given as an advance to purchase the land which is evident from page no. 44 of the assessee s paper book which clearly shows that the advance money given to Shri Jasbir Singh was taken back by Shri Vinod Kumar on 25.12.2005. Both the parties affixed their signature on the above said document which is witnessed by Shri Ajay Kumar son of Shri Jagdish and Shri Jagdish Son of Shri Raj Kumar. 11. From the above facts, it is clear that Shri Vinod Kumar was a man of means, his creditworthiness was proved and the identity was not in doubt since the assessee produced Shri Vinod Kumar before the AO who recorded his statement wherein the investment in the shares was admitted, copy of the share certificate, is placed at page no. 36 of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year of Rs. 99,213/- which gave the total reserve and surplus of Rs. 72,93,433/-. The AO accordingly made the addition of Rs. 5,79,203/- by invoking the provisions of Section 2(22)(e) of the Act. Reliance was placed in the judgment of the Hon ble Bombay High Court in the case of Wall Chand Co. Ltd. vs. CIT (1975), 100 ITR 598. 13. Being aggrieved the assessee carried the matter to the Ld. CIT(A) and submitted that the assessee company was incorporated during the year under consideration with the objective of dealing in real estate business and a sum of Rs. 10,00,000/- was received from one of its client M/s Precision Stock Credit Pvt. Ltd. It was further submitted that the provisions of Section 2(22) (e) of the Act make it clear that in case some money has been advanced by any company for some business transaction, the same cannot be considered for the purpose of Section 2(22)(e) of the Act. It was further, submitted that the money advanced by M/s Precision Stock Credit was on account of business transaction and also the said party did not has accumulated profits to the extent of amount advanced by it to the assessee. It was emphasized that the balance sheet of M/s Prec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. Universal Medicare Private Ltd. [2010] 324 ITR 263 (Bom) 2.Commissioner of Income Tax vs. Ankitech Pvt. Ltd. Others [2012] 340 ITR 14 (Del.) 3.Commissioner of Income Tax vs. MCC Marketing (p.) Ltd. [2012] 343 ITR 350 (Del.) 4. Assistant Commissioner of Income Tax vs. Bhaumik Colour (P) Ltd. [2009] 313 ITR 146 5. CIT vs. AR Magnetics Pvt. Ltd. (2014), 220 Taxman 209 (Delhi)(HC) 6. C.I.T. vs. Navyug Promoters (P) Ltd. (2011) 203 Taxman 618(Del.) 16. In his rival submissions, the Ld. DR strongly supported the orders of the authorities below and further submitted that since Shri Jasbir Singh was a common share holders having more than 20% share holding in the assessee company and M/s Precision Stock and Credit Pvt. Ltd. which was having an accumulated profits. Therefore, the provisions of Section 2(22)(e) were rightly invoked by the AO and the Ld. CIT(A) was justified in confirming the addition made by the AO. 17. We have considered the submissions of both the parties and carefully gone through the material available on the record. In the present case, it is noticed that the assessee entered into an agreement with M/s Precision Stocks and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ike this, the recipient would be a shareholder by way of deeming provision. It is not correct on the part of the Revenue to argue that if this position is taken, then the income is not taxed at the hands of the recipient . Such an argument based on the scheme of the act as projected by the learned counsel for the Revenue on the basis of sections 4,5,8,14 and 56 of the Act would be of no avail. Simple answer to this argument is that such loan or advance, in the first place, is not an income. Such a loan or advance has to be returned by the recipient to the company, which has given the loan or advance. 27. Precisely, for this very reason, the courts have held that if the amounts advanced are for business transactions between the parties, such payment would not fall within the deeming dividend under section 2(22)(e) of the Act. 18. In the present case also, the assessee company is not the shareholder in M/s Precision Stock Credit Pvt. Ltd. and received the amount from the said company in the course of ordinary business activities. Therefore, in view of ratio laid down by the Hon ble Jurisdictional High Court in the aforesaid referred to case, the provisions of secti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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