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2012 (8) TMI 582 - AT - Income TaxAddition of income from house property - AO stated that Annual Value as offered by the assessee was understated - CIT (A) deleted the addition - Held that - As decided in DCIT Versus Reclamation Realty India (P) Ltd. 2010 (11) TMI 477 - ITAT, MUMBAI the rateable value under the Municipal law has to be adopted as annual value u/s. 23(a) & that the A.O. has grossly erred by calculating the annual let out value by estimating the market value of the property at ₹ 1,20,00,000/- ignoring the fact that the Municipal Rateable Value given by the Government Authority i.e Mumbai Municipal Corporation at ₹ 1,58,372/- - against revenue. Treating the monies advanced to assessee as deemed dividends - Held that - Deemed dividend can be assessed only in the hands of a person who is a shareholder of the lender company and not in the hands of a person other than shareholder & the expression shareholder referred to in section 2(22)(e) refers to both a registered shareholder and beneficial shareholder - It is not in dispute that the assessee company is not holding any share in the company who provided advances i.e. neither the assessee company is a registered share holder nor beneficial share holder in the said company the provisions of section 2(22)(e) are not applicable - inclined to uphold the findings of the ld. CIT (A) in deleting the addition made by the A.O - against revenue.
Issues Involved:
1. Determination of Annual Letting Value (ALV) of the property under Section 23(1)(a) of the Income Tax Act. 2. Applicability of Section 2(22)(e) regarding deemed dividend. Detailed Analysis: Issue 1: Determination of Annual Letting Value (ALV) of the Property Facts: The assessee company, engaged in realty development, rented out a flat to M/s Aventis Pharma Ltd. at varying monthly rents. The Assessing Officer (A.O.) determined the annual rateable value of the property at Rs. 1,20,00,000/- based on the acceptance of an interest-free deposit, which was significantly higher than the municipal valuation. CIT(A) Decision: The CIT(A) deleted the addition made under the head "income from house property" by the A.O., following precedents from the Tribunal and High Court decisions, which mandated adopting the municipal rateable value as the annual value under Section 23(1)(a). Tribunal's Analysis: The Tribunal upheld the CIT(A)'s decision, noting that the actual rent received by the assessee was much higher than the municipal valuation. The Tribunal referenced its earlier decisions and the jurisdictional High Court's ruling that the municipal rateable value should be adopted as the annual value under Section 23(1)(a). Consequently, the A.O.'s determination of the gross ALV at Rs. 1,20,00,000/- was deemed unjustified, and the CIT(A)'s deletion of the addition was upheld. Conclusion: The grounds taken by the Revenue regarding the determination of the ALV of the property were rejected, affirming the CIT(A)'s approach. Issue 2: Applicability of Section 2(22)(e) Regarding Deemed DividendFacts: The A.O. observed that the assessee received share application money from M/s New Dimension Consultants P Ltd. (NDCPL), where a common shareholder held substantial interest. The A.O. treated this amount as deemed dividend under Section 2(22)(e), adding Rs. 74,06,226/- to the assessee's income. CIT(A) Decision: The CIT(A) deleted the addition, citing the jurisdictional High Court's decision in CIT vs. Universal Medicare Private Limited, which held that deemed dividend could only be taxed in the hands of the shareholder, not the recipient company. Tribunal's Analysis: The Tribunal affirmed the CIT(A)'s decision, referencing the Special Bench's ruling in ACIT v. Bhaumik Colour (P.) Ltd. and the jurisdictional High Court's decision. It was established that the assessee company was neither a registered nor a beneficial shareholder in NDCPL, thus the provisions of Section 2(22)(e) were inapplicable. Conclusion: The grounds taken by the Revenue regarding the applicability of Section 2(22)(e) were rejected, and the CIT(A)'s deletion of the addition was upheld. Common Grounds in Other Appeals:Facts: Similar issues regarding the determination of ALV and applicability of Section 2(22)(e) were raised in the appeals for assessment years 2002-03 to 2006-07. Tribunal's Decision: The Tribunal directed the A.O. to follow its findings from the lead case (ITA No. 4330/Mum/2011 for A.Y. 2007-08), rejecting the Revenue's grounds in these appeals as well. Conclusion: The Tribunal consistently upheld the CIT(A)'s decisions across all assessment years, leading to the dismissal of the Revenue's appeals. Final Result: All appeals by the Revenue were dismissed.
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