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TMI Blog2015 (7) TMI 287X X X X Extracts X X X X X X X X Extracts X X X X ..... more than 10% shares in the lender company had reserves and surplus in its balance sheet - CIT(A) deleted the addition - Held that:- As per section 2(22)(e) of the I.T.Act the payment must be to a person who is a registered share holder. The word "share-holder" existed in section 2(22)(e) and has been interpreted to mean a registered shareholder. In the present case it is true that Mr.S.N.Rungta, a shareholder is having more than 20% share in the assessee company and also 10% share in M/s.Rungta Engineering Pvt. Ltd wherefrom the assessee has taken loans. The recipient company does not hold any share in the lender company in view of the decision of Special Bench of Mumbai Tribunal in the case of ACIT vs.Bhaumik Colour Pvt. Ltd. (2008 (11) TMI 273 - ITAT BOMBAY-E) where it has been held that deemed dividend can be assessed only in the hands of a person who is a shareholder of the lender and not in the hands of the person other than the shareholders. Therefore the AO is not justified in treating the same as deemed dividend in the hands of the assessee. We find no infirmity in the order of the ld. CIT(A), who has rightly allowed the claim of assessee. - Decided against revenue. Tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... leave to amend, alter or delete any of the grounds mentioned above or to add a new ground if required. 2.1. The Revenue has raised the following grounds of appeal for A.Yr.2006-07 as under :- (i). That under the facts and circumstances of the case the Ld.CIT(A) has erred in law as well as in facts in deleting the disallowance made by the AO of the alleged claim of loss of the assessee company in trading of penny stock. (ii) That under the facts and circumstances of the case the Ld.CIT(A) has erred in law as well as in facts in holding that the profit from sale of flat is to be treated as income from capital gain instead of business income. (iii) That under the facts and circumstances of the case the Ld.CIT(A) has erred in law as well as in facts in deleting the addition made u/s 2(22)(e) of the Income tax Act, 1961, in contravention to the basic provisions of the Act. (iii) That the Department craves leave to amend, alter or delete any of the grounds mentioned above or to add a new ground if required. 2.2. The Revenue has raised the following grounds of appeal for A.Yr.2003-04 as under :- (i) That under the facts and circumstances of the case the Ld.CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ations of the AO included - (i) the car parking space not considered for derived the rate of per square foot, (ii) Value of land not been considered for computing LTCG (iii) nature of expenses incurred which as per the AO construed to be building used for commercial purposes and also (iv) Non-filing of Wealth tax return. (e) The AO has also made certain observations in respect of the Development Agreement deed which are also narrated briefly - (i) Construction of property started on 7.6.96 and was completed on 20.7.2001. The majority of the property was sold on completion in that same year and the balance in the subsequent year and hence the intention of the assessee was to earn profit and not capital gains; (ii) If the capital gains would have been computed then it would have been made as per the valuation of Registering Authority as per section 50C; (iii) The AO had made certain other observations like that of - (a) liquidated damages, (b) car parking space being not considered, (c) Cost of building in the Accounts included the cost of land at Sankrail, (d) flat and other areas have been demarcated between the developer and the assessee, (e) purchase of additional 607 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The said land was never converted in stock-in-trade. The assesseee entered into a joint venture agreement with M/s The Right Address Ltd, on 28.1.1994 for development of a building on the said property. As per the development agreement the assessee was entitled 59% of the total FAR together with 59% undivided share in the land comprised in the building to be constructed and also in the common area and installation attributable to 59% (which ratio was modified to 49.29% through later amendment to the agreement) in the said building. The constructed area received by the assessee was in lieu of the land, which was all along been held by the assessee as a capital asset. There was no intention to treat the same as stock in trade. Nothing has been brought on record with regard to the intention of the asessee to treat the said capital asset as stock in trade. The assessee has relied upon the decision of Mumbai Bench of ITAT in the case of ACIT vs M/s. Shree Dhootapapheswar Ltd. in ITA No.721/M/05 dated 30.03.2009. A copy of the same is placed on record. In this case the facts and the decision are reproduced as under :- a) The assessee was holding this land in the year 1936 and had co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s deemed dividend u/s 2(22)(e) of the IT Act. 6.1. The ld. CIT(A) after considering the submissions of the assessee deleted the addition so made in view of the decision of the Special Bench Mumbai Tribunal in the case of ACIT vs Bhaumik Colour Pvt. Ltd. 313 ITR 146 wherein it has been held that deemed dividend can be assessed only in the hands of a person who is a shareholder of the lender and not in the hands of the person other than the shareholders. 7. The ld. DR relied upon the order of AO while the ld. Counsel for the assessee relied upon the submissions made before ld. CIT(A) and order of ld. CIT(A). 8. We have heard the rival contentions and perused the facts of the case. As per section 2(22)(e) of the I.T.Act the payment must be to a person who is a registered share holder. The word share-holder existed in section 2(22)(e) and has been interpreted to mean a registered shareholder. In the present case it is true that Mr.S.N.Rungta, a shareholder is having more than 20% share in the assessee company and also 10% share in M/s.Rungta Engineering Pvt. Ltd wherefrom the assessee has taken loans. The recipient company does not hold any share in the lender company in vie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 0.002 and 0.001 for the financial year ended 31.3.05 and 31.3.06 respectively (c) The company was suspended from trading from 5.12.05 to 3.10.2006 and (d) The company had been incurring loss of the years ended 31.3.2004, 31.3.2005 and 31.3.2006 respectively. The AO had gathered certain information from Calcutta Stock Exchange Association Limited by issue of notice u/s 133(6) and as result of such verification made observations which are discussed briefly as below : (i) The name of the Broker was Ahilya Commercial Pvt. Ltd. and the shares were traded through CSE; (ii) The scripts of M/s. Sharang Vinyog Ltd. executed by Ahilya Commercial Pvt. Ltd. on 21.7.2005 to the assessee were through cross deals; (iii) The said broker, viz. Ahilya Commercial Pvt. Ltd was suspended in September 2005 from trading by SEBI and the suspension was subsequently revoked by SEBI in August 2008 and that the suspension was for violation of SEBI Rules. (iv) Ahilya Commercial Pvt. Ltd. was also suspended for some time by SEBI which was subsequently revoked; (v) The AO had further mentioned the price of the shares of M/s. Sharang Vinyog Ltd from April 2005 till December 2005 and had ..... X X X X Extracts X X X X X X X X Extracts X X X X
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