9911796707
TMI Blog2022 (12) TMI 939X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,72,35,064/- and thus the transaction was not made for rights in the property as claimed. 3. The appellant craves leave to add, alter or amend any of the ground(s) of appeal before or during the course of hearing of the appeal." 3. As per the grounds of appeal, the Revenue is aggrieved by the order of the CIT(A) deleting the additions made in the hands of the assessee on account of 'deemed dividend' under Section 2(22)(e) of the Act. 4. Briefly stated, the assessee-company is incorporated with main object to carry on business as a real estate developer. The return filed by the assessee was subjected to scrutiny assessment. On perusal of the balance-sheet and financial accounts of the assessee, the Assessing Officer observed that the assessee has inter alia undertaken certain related party transactions. It was found that the assessee has received loans from a company, namely, Landspace Construction Pvt. Ltd. (Landscape) wherein the assessee holds 20% equity shares and thus a holds substantial interest. Consequently, the Assessing Officer asked the assessee to show cause as to why provisions of Section 2(22)(e) of the Act should not be applied for the receipt of the loan from th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f loan. The Assessing Officer observed that the loan transactions have been given the false exterior of a business transaction which in reality is a loan transaction as admitted in the financial statement. The MOU executed was found by the AO to be a make believe between to sister concerns and which remains unsubstantiated by a third party independent evidence. It was also observed that the repayment of 0.92 crore approx. to Landspace as per the ledger account reproduced in paragraph 4 of the assessment order is without any explanation. The Assessee has failed to offer any justification as why the lender will give excess money and seek return thereof in a transaction of such type which is intended to be governed by MOU. The Assessing Officer thus, for the detailed reason noted in the assessment order, eventually concluded that the assessee being shareholder of Landspace and having received an amount of Rs.253.57 lakhs from the lender company is susceptible to tax on such loans received meets the ingredients of deeming fiction provided in Section 2(22)(e) of the Act. An addition of Rs. 2,53,75,000/- was thus made to the total income returned by the Assessee under the shelter of S. 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er has relied on the facts that though the appellant has claimed the amount of Rs. 2,53,75,000/- as business transaction but in its balance sheet, in the Notes of Account, transactions with M/s. Landspace Construction Pvt. Ltd have been categorized under the head InterCorporate Loan. The Assessing Officer has also raised doubts on the authenticity of MOU dated 02.04.2012 with M/s. Landspace Construction Pvt. Ltd for purchase of two flats, Agreement to sell (ATS) dated 13.07.2015 with M/s Garrison Developers Pvt. Ltd for sale of these properties and letters issued by the developer for replacement of flats with villas. The AO has raised objections citing the procedural infirmities in these MOU and ATS stating that all these are managed by appellant in order to show the transactions with M/s. Landspace Construction Pvt. Ltd as commercial transactions, not the loan transactions. However, the detailed analysis of these agreements and the transactions entered therein, fairly say the different story. The perusal of MOU dated 02.04.2012, the copy of which is submitted during the appellate proceedings, reveals that the appellant company agreed with M/s. Landspace Construction Ltd. to acquir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plus funds or taking loans from NBFC do not make any difference to the merit of the case. The comments of statutory auditors in the notes on account also do not alter the real nature of the transactions. In view of this, I hold that the amount of Rs. 2,53,75,000/- received by appellant from M/s. Landspace Construction Pvt. Ltd is in the nature of business/commercial transaction, not as loan transaction and therefore, not covered by the provisions of section 2(22)(e) of the Act. I, therefore, delete the addition made by AO and allow the grounds taken by appellant." 8. Aggrieved by the reversal of additions made under S. 2(22)(e) of the Act by the CIT(A), the Revenue has preferred appeal before the Tribunal. 9. The Ld. DR appearing for the Revenue broadly relied upon the observations made in the assessment order. The ld. DR pointed out that the stand taken by the assessee does not match with the audited financial statement of the Assessee, where transactions have been recognized and reported as 'inter- corporate loans has not been taken cognizance of in its natural perspective. It was contended that the purported MOU between group entities seeking to demonstrate a transfer 50% righ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns and has given improper relief on the basis of sham documents which have not been acted upon. 13. The ld. DR thus urged for reversal of the order passed by the CIT(A) and restoration of the action of the Assessing Officer. 14. The ld. Counsel for the assessee, on the other hand, submitted that the CIT(A) has acted upon the tell-tell evidences placed before him which were duly confronted to the Assessing Officer in the course of the appellate proceedings by obtaining a remand report. The ld. counsel submitted that the Assessing Officer missed the point that both the assessee as well as Landspace are engaged in the real estate business and the transaction of transfer of 50% right in the properties provisionally allotted by the builder in favour of the assessee is an act of ordinary business in real estate business. The transfer of rights in the allotment of property in Sun Court is backed by MOU which was presented to the assessee at the first instance in the course of the assessment proceedings. A part return of the amount received during the year again can be for a variety of reasons and will not vitiate the real character of business transactions. It was next submitted that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g to part with 50% right therein in favour of Landspace. As claimed, the MOU was acted upon and the money was transferred by the lender to the assessee in consideration of acquisition of rights in the property allotted in favour of the assessee by the builder. An Agreement to Sale (ATS) dated 13.07.2015 was thereafter was entered into jointly with Landspace (confirming party) as proposed sellers with the proposed buyer M/s. Garrison Developer. Thus, the MOU was duly acted upon at a later point of time. The resultant profit were also claimed to have been shared equally as provided in MOU to support the inherent character of money received from Landspace. 19. These facts clearly vindicates the claim of the assessee that the amount received was in consideration of transfer of rights in the property allotted and thus cannot be regarded as a loan transaction of ordinary nature. 20. We have carefully weighed the totality of circumstances. The moot question is the credibility of explanation offered by the assessee to support its claim of business transaction qua a loan transaction of ordinary nature. To support the nature of money received from Landspace, the assessee claims that such M ..... X X X X Extracts X X X X X X X X Extracts X X X X
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