9911796707
TMI Blog2012 (9) TMI 825X X X X Extracts X X X X X X X X Extracts X X X X ..... against the order dated 22.12.2010 of the CIT(Appeals)-III, Bangalore. 2. Following grounds have been raised in this appeal: "1. The order of the learned CIT(A) is opposed to law and facts of the case. 2. The learned CIT(A) erred in deleting addition of Rs. 1 crore u/s 2(22)(e) having not considered the facts and circumstances of the case and deficiencies in the agreement purported to be entered by the assessee and the company for purchase of property from the assessee which prove that the agreement is not genuine. The CIT(A) ought to have appreciated that the agreement made on an unstamped paper without complying with the provisions of Indian Contract Act/Indian Registration Act produced by the assessee was only to circumvent the provisions of section 2(22)(e). 3. The CIT(A) also failed to appreciate the applicability of the decision of Hon'ble Calcutta High Court in the case of M D Jindal Vs. CIT (1987) 164 ITR 28, to the facts of the present case in support of the stand taken by the AO that the so called agreement was not genuine and was an ostensible device to circumvent the provisions of section 2(22)(e) of the l.T.Act, 1961. 4. For these and other grounds that may be u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2,88,845 and that the purported sale agreement of the property was not executed nor registered, so it was to be presumed that the intention of the company was to benefit the shareholder. The AO was of the view that the provisions of section 2(22)(e) of the Act were applicable. Reliance was placed on the following case laws:- (i) M.D. Jindal v. CIT (1987) 164 ITR 28 (Cal) (ii) Smt. Tarulata Shyam v. CIT (1977) 108 ITR 345. 6. Accordingly the AO considered the amount of Rs. 1 crore received by the assessee from the company M/s. Mc Creade Software (Asia) Pvt. Ltd., Bangalore, as deemed dividend and added the same to the income of the assessee. 7. The assessee carried the matter to the ld. CIT(Appeals). The submissions made by the assessee are reproduced by the ld. CIT(A) in paras 4.1 to 4.9 of the impugned order and read as under:- "4.1 As per the agreement dated 06.01.2007 the property intended to be purchased by the company from the appellant is a residential property located at No.795, 12th B Cross, 23rd Main, J.P. Nagar 2nd Phase, Bangalore measuring 134.20 sq. mtrs. The built up area is 1700 sq. ft. The Assessing Officer has stated that the market value of the property is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is advance of goods, since the share holder has been benefited, such benefit is taxable as dividend. This is not a case in respect of transaction of the appellant. In the case of the appellant the advance is made for purchase of the property. The appellant is required to transfer the property. The transaction is in lieu of an immovable property owned by the appellant and to be transferred and therefore there is no benefit accruing to the appellant. The decision is not applicable to the facts of the appellant. In para 6.3 of the order the facts of the decision of the case of Smt. Tharulatha Shyam Vs. CIT (1977) 108 ITR 345 (SC) has been discussed. In the said decision it is held that the provisions of section 2(22) (e) of the act are attracted if all the conditions set out in the provision are satisfied at the time of making the advance. This decision is relevant in a case where an advance is made and as on the last day of the accounting year such advance may not be outstanding. The decision squarely applies to cases where loan or advance is made without the assessee requiring to transfer any asset or render services in return. The case is not applicable to the appellant, since ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amendment to the provisions of section 2(22)(e) of the Act in 1987 the principle laid down by the Supreme Court in regard to the intention of the legislation does not change. The ratio laid down in this decision coupled with the fact that the deemed fiction cannot be extended beyond the intention of the legislation, the provisions of section 2(22)(e) of the Act will not apply to the facts of the case, since the advances are made against purchase of property. The intention is not to benefit the share holder. 4.6 The appellant further submits that the word loan means a lending. It is the delivery by one party and receipt by another party of a sum of money upon an agreement either expressed or implied to repay it with or without interest. This view in regard to the definition of loans or advance has been expressed in the decision of Madras high court in the case of G.R.Govindarajulu Naidu Vs. CIT (1973) 90 ITR 13 (Mad). Even in the decision of Supreme Court in the case of Bombay Steam Navigation Company (1953) Pvt Ltd Vs. CIT (1965) 56 ITR 52 (SC) the same view has been upheld. In the case of the appellant what is agreed upon is transfer of immovable property and the advance is a pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. Accordingly the addition made by the AO was deleted. Now the department is in appeal. 9. The ld. DR strongly supported the order of the Assessing Officer and reiterated the observations made by the AO in paras 6 to 8 of the assessment order dated 22.12.2009. He further submitted that the ld. CIT(A) was not justified in deleting the addition made by the AO. 10. In his rival submissions, the ld. counsel for the assessee reiterated the submissions made before the authorities below and further submitted that the assessee received advance against the property which was to be sold to M/s. Mc Creade Software (Asia) Pvt. Ltd. it was further stated that the advance was taken against the sale of property which could not be transferred to the company due to certain formalities which were to be fulfilled, so there was no question of invoking the provisions of section 2(22)(e) of the Act and making the addition by considering the advance amount as deemed dividend, therefore the ld. CIT(A) was fully justified in deleting the addition made by the AO. 11. We have considered the submissions of both the parties and carefully gone through the material available on record. In the present case, i ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
