TMI Blog2022 (7) TMI 1201X X X X Extracts X X X X X X X X Extracts X X X X ..... tention that the impugned addition deserves to be restricted to its 34% stake only AO s action treating the advances received from the company as business income already stands deleted. We hold that the same has no bearing on the instant issue of deemed dividend whose application stands sufficiently proved qua the loan and advances coming from the company side to his account. We accordingly uphold the impugned identical deemed dividend addition in assessee s twin appeals. These two cases fail accordingly. Disallowing set-off which already has been taxed as deemed dividend - Faced with this situation and keeping in mind the fact that we have upheld Section 2(22)(e) addition in preceding paragraphs, we are of the view that larger interest of justice would be met in case if the Assessing Officer readjudicates the assessee s instant solitary substantive grievance in this third assessment year 2014-15 afresh as per law. We order accordingly. We make it clear that the assessee shall be at liberty to file all the relevant details in consequential proceedings. This last appeal is allowed for statistical purposes, therefore. - IT(SS)A Nos. 06 And 07/PUN/2017 And ITA No. 609/PUN/20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made the following submission, in support of this ground of appeal: 4. Ground No.3: Alternative addition .of Rs, 1,19,27,086/ on the ground of deemed dividend (Para 6.7 of Assessment-Order) : 4.1. After making addition of Rs. 1,19,27,086/-, being the amount of excess receipt over the 15% of customer advances received by JREPL, on the ground of compensation for delay in project execution, A.O. considered such excess paid amount, over above 15%/17.33, as advance covered by the provisions of sec. 2(22)(e) and held that, if the said sum of Rs. 1,1,9,27;086/- is not assessed as business income, then it be assessed as deemed dividend u/s 2(22)(e). 4.2. While doing so he has- ignored the submission of appellant that the- extra sums paid being again against property i.e. value to be received was not all advance, as envisaged u/s 2(22)(e). Sec. 2(22)(e) envisages advances having the features akin to loan and not all types of advances. 4.3. Please note that, appellant was holding minimum 34% of share capital of JREPL during the entire period of previous year relevant to A. Y. 2012-13 (Page Nos. 51). Further, accumulated profits, as on 331.03.12, include opening balan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n in return to an advantage conferred upon the company by such. share holder. (emphasis supplied) Similarly, in the case of Raj Kumar v/s CIT (Page Nos: 70 to 73), the Delhi High Court has held as under, at Para Nos. 10.9, 11 12 thereof- 10.9 Keeping the aforesaid rule in mind we are of the opinion that the word advance which appears in the company of the word loan could only mean such advance which carries with it an obligation of repayment. Trade advance which are in the nature of money transacted to give effect to a commercial transactions would not, in our view, fall within the ambit of the provisions of Section 2(22)(e) of the Act. This interpretation would alloy the rule of purposive construction with noscitur a sociis, as was done by the Supreme Court in the case of LIC Officers Assn. (2008) 3 SCC 321. The observation in para 24 of the report being opposite are extracted here in below: -. Each word employed in a statute must take colour from the purport and object for which it is used. The principle of purposive interpretation, therefore, should be taken recourse to . 11. A close examination of the judgment of the Bombay High Court in the case of Nag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , @ 34% thereof i.e. the share to which appellant was entitled to at Rs. 15,76,497/-, in law. The A.O. erred in including current year's business profits of JREPL in calculation of accumulated profits. This is so because it is held by the Supreme Court in the case of CIT vis Ashokbhai Chimanbhai (56 ITR 42). that profits do not accrue from day to day or even from month to month and have to be ascertained by a comparison of assets at two stated points. Unless the right to profits comes into existence there is no accrual of profits and the destination of profits must be determined by the title thereto on the day on which they arise. Relying on the decision of: the Supreme Court in Ashokbhai Chimanbhai, it is held by ITAT, Ahmedabad in M.B. Stock Holding (P) Ltd v/s ACIT (84 ITD 592 Page Nos 75 to 82) as under at the conclusion of Para 24 thereof Keeping in view the above interpretation of law, it cannot be said that the Explanation 2 to section 2(22)(e) is redundant. It is bound to be for a specific purpose. The question for determination is as to what is the purpose for which this Explanation. has been incorporated when the Hon'ble Supreme Court in the case of Asho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment of deemed dividend in the hands of appellant to Rs.15,76,497/-. 4.7. Before conclusion please note that, the amount assessed as deemed dividend is subsequently assessed as sale proceeds of land and taxed accordingly. Thus, the same receipt is taxed twice, once as deemed dividend then in the subsequent assessment year as sale proceeds of land. This has resulted into double taxation of the same receipt it is settled law that there cannot be double taxation of same amount. Hence, if at all any amount is held as taxable as deemed dividend in A.Y. 2012-13, then corresponding credit for the same may please be directed to be allowed in the subsequent years, when such receipt is offered to tax as sale proceeds of land under Development Agreement. Findings: 5.2 I have gone through the submissions filed by the appellant. Brief facts are that appellant was holding 34% of beneficial shares throughout the year in the company M/s. JREPL and also entered into a Development Agreement dated 02.05.2008 with the company M/s. Jaikumar Real Estate Pvt. Ltd. (hereinafter referred as JREPL) for development of project 'Parksyde'. According to clause 3 of the development ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... BANK PAYMENT BANK PAYMENT/131 25,000.00 16-82011 Cr Union Bank CC A/C 75004 CHQ No. 41116277 BANK PAYMENT BANK PAYMENT/189 2,50,000.00 29-8-2011 Cr Union Bank CC A/C 75004 CHQ No. 41116289 BANK PAYMENT BANK PAYMENT/203 3,50,000.00 20-9-2011 Dr Union Bank CC A/C 75004 CHQ No. 070151 BANK RECEIPT BANK RECEIPT/0703/70 9,00,000.00 24-9-2011 Cr Union Bank CC A/C 41116237 BANK PAYMENT BANK PAYMENT/285 5,00,000.00 28-9-2011 Dr Union Bank CC A/C 75004 CHQ No. 02070161 BANK RECEIPT BANK RECEIP/07-08/70 12,50,000.00 7-10-2011 Cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 31-1-2012 Dr Union Bank CC A/C 75004 CH No. 02081607 TR FROM JREPL PARKSYDE A/C BANK RECEIPT BANK RECEIPT/07- 08/84/129 15,10,000.00 9-2-2012 Dr Union Bank CC A/C 75004 RTGS BANK RECEIPT BANK RECEIPT/07- 08/84/134 14,50,000.00 22-2-2012 Dr Union Bank CC A/C 75004 rtgs BANK RECEIPT BANK RECEIPT/0708/138 17,26,500.00 24-2-2012 Dr Union Bank CC A/C 75004 Chq no. 0209583 BANK RECEIPT BANK RECEIPT/0708/139 2,60,385.00 Dr (as per details) Union Bank CC A/C 75004 Bank Charges rtgs BANK RECEIPT BANK RECEIPT/0708/140 29,01,454.00 29-2-2012 Dr Union Bank CC A/C 75004 RTGS ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .00,000/- back and after for days advanced further amount of Rs.5,00,000/-. On 7th October, 2011, the appellant had outstanding receivable from the company of Rs.20,00,000/-. On 14.11.2011, appellant received Rs.24,00,000/ - and in this manner for the first time, he had received advance of Rs.4,00,000/- from company without any reference to the contribution to be received on account of land transaction. First credit on account of land contribution was received on 21.11.2011 of Rs.15,00,000/-. Thereafter, further amount of Rs.75,00,000/- was received on account of internal transfer from the company. At the year end, i.e. on 31.03.2012, amount of Rs. 3,18,84,136/ - was debited being the exact amount receivable from the developer company as per clause (3) of the development agreement. By the year end, the appellant had received amount of Rs.1,19,27,086/- in excess of amount receivable on account of land contribution. The appellant had clubbed both the accounts i.e. running account of pure financial transactions with Developer Company as well as on account of transactions undertaken as per development agreement. As per terms of development agreement, the appellant was not entitled to r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cates that accumulated profits mean, profits which have been accumulated before the beginning of the accounting year which would be the previous year relevant to the assessment year. The provision of s. 2(6A)(e) may fall for consideration during that previous year and at that point of time it would not be even possible to know whether in that previous year there were any profits or to ascertain their amount and even if there were profits of that previous year up to that point of time, whether they would not be wiped out during the subsequent period of that previous year. The profits of that previous year would be current profits as distinguished from accumulated profits . Therefore, the profits of that previous year cannot be included in accumulated profits . ITAT Ahmedabad following the judgement of Apex Court in the case of Ashokbhai Chimanbhai and also after considering Explanation to Section 2(22)(e) has held as under: Keeping in view the above interpretation of law, it cannot be said that the Explanation 2 to section 2(22)( e) is redundant. It is bound to be for a specific purpose. The question for determination is as to what is the purpose for which this Explan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idered as accumulated profit. Therefore, accumulated profit has to be considered at Rs.60,92,388/- (Rs.46,36,756/- + Rs.14,55,632/-) and not at Rs.1,63,91,548/ - which was accumulated profit as on 31.03.2012. 5.4 Another contention of the appellant was that since appellant had 34% beneficial shares, the deemed dividend should be restricted to 34% of accumulated profit. Contention of appellant is without any basis as there is no provision u/s 2(22)(e) to consider dividend proportionate to the share holding. It only. states that advances given to the extent of accumulated profit of the company has to be considered as deemed dividend. Identical issue arose before the Hon'ble Gujarat High Court in case of Mayur Madhukant Mehta (85 ITR 230) wherein Hon'ble Court rejected the contention of the assessee and held as under: 6. If there is one rule of construction clearer than any other, it is that the meaning of a statutory provision must be gathered from a plain natural construction of the words used by the legislature. If the words of the statutory provision are themselves precise and unambiguous, then no more can be necessary than to expound those words in their ordina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cumulated profits pro rata amongst the shareholders, since such reference would have been wholly incompatible with the subject-matter of the section which deals essentially with an individual shareholder who receives payment from the company. Here the body of shareholders is not on the scene but only an individual shareholders who receives payment from the company and who is therefore sought to be taxed on such payment. The concept of distribution of accumulated profits is wholly absent in section 2 (6A) (e) and it is not possible to project that concept in the section and then to read the section as meaning that so much of the payment as represents the proportionate share of the shareholder in the accumulated profits must be treated as dividend. To construe section 2 (6A) (e) in the manner suggested on behalf of the assessee would involve reading words in the section which are not there. A comparison of the language of section 2 (6A) (e) with that of clauses (a), (b), (c) and (d) of section 2 (6A) also supports this conclusion. Section 2 (6A), clauses (a), (b), (c) and (d) speak of distribution by a company amongst shareholders and the concept of taking the share of accumulated pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also referred to the corresponding adjustments made in light of the assessee s detailed paper book page 135 containing the corresponding opening balance, payments received, adjustments and net amount in FY 2011-12 to 2015-16. Learned counsel further sought to highlight the fact that the company hereinabove had received advances from its customers which in turn were adjusted against the corresponding liabilities involving the assessee. 5. All these arguments failed to evoke our concurrence in assessee s favour. We make it clear that the assessee s detailed paper book running into 219 pages contains his JDA with the company as well as page 84, clause 3 therein suggests that the assessee as well as the company along with other owners/shareholders had to open/operate an escrow account with joint signatures in which the corresponding sale proceedings had to be deposited to be disbursed to the developers. Mr. Shingte sought to clarify at this stage that no such Escrow account had been opened which means that the said stipulation stood rendered frustrated. We are unable to accept the assessee s arguments as it is clear not only from a perusal of case records as well as the CIT(A) s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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