9911796707
TMI Blog2011 (8) TMI 1080X X X X Extracts X X X X X X X X Extracts X X X X ..... ered the income in the year of completion of project, therefore, we do not find any sound reason as to why the same should be rejected and percentage completion method be followed. The Bangalore Bench of the Tribunal in the case of PRESTIGE ESTATE PROJECTS (P) LIMITED. VERSUS DEPUTY COMMISSIONER OF INCOME-TAX. [ 2009 (9) TMI 627 - ITAT BANGALORE-B] and relying on the decision of the Hon ble Supreme Court in the case of COMMISSIONER OF INCOME TAX, CHENNAI VERSUS M/S BILAHARI INVESTMENT (P) LTD [ 2008 (2) TMI 23 - SUPREME COURT] has held that the assessee developer having regularly employed project completion method, which is an accepted method of accounting and the Central Government having not notified AS-7 under sec. 145(2), the AO could not reject the accounts u/s 145(3) on the ground that the assessee has not followed percentage completion method of accounting. We find merit in the submission of assessee that he has to construct the complete building as per the specifications over a period and receive the purchase consideration from time to time from the purchasers and hand over the possession of the building when the building is fully completed, it is only at that time the risk ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to 1st April, 2005, we hold that the amendment as introduced by the Finance Act, 2004 w.e.f. 1st April, 2005 i.e. asst. yr. 2005-06, is not applicable to assessee s case. The project undisputedly was approved before 1st April, 2005 therefore the provisions of the old law will apply. Therefore, the assessee cannot be denied the benefit of deduction under sec. 80-IB(10) for the commercial area exceeding 5 per cent of the built-up area or 2,000 sq. ft. whichever is less - Decision in favour of Assesee Deduction u/s 80- IB - Purchasers combined more than one flat- Exceeds Permissible Build Up Area - Revenue objected that the assessee has sold two or more than two flats to one party, the combined area of which is more than 1,000 sq. ft HELD THAT:- We find merit in the submission of assessee that the area of two flats should not be combined even though the two flats were sold to one person as the built-up area of each flat as approved by CIDCO is less than 1,000 sq. ft. as per the approved plan and occupancy certificate received. Also, there is no evidence with the Department that the assessee has sold after combining the two flats together and sold to one party. Therefore, merely becaus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hareholder in HEBPL nor HEBPL is a registered shareholder in the assessee company. It has been held by the Special Bench of the Tribunal in the case of ASSISTANT COMMISSIONER OF INCOME-TAX. VERSUS BHAUMIK COLOUR (P) LIMITED. [ 2008 (11) TMI 273 - ITAT BOMBAY-E] that deemed dividend can be assessed only in the hands of the person who is a shareholder of the lender company and not in the hands of a person other than a shareholder and not in the hands of the borrowing concern in which such shareholder is member or partner having substantial interest. Since the assessee company is not a shareholder in HEBPL, therefore, merely because Smt. Ujjwal Haware is a shareholder in both the concerns having 20 per cent equity share no amount can be taxed in the hands of the assessee company under sec. 2(22)(e) - Addition made deleted - Decision in favour of Assessee X X X X Extracts X X X X X X X X Extracts X X X X ..... ally associated with ownership. (ii) No significant uncertainty exists regarding the amount of the consideration that will be derived from the real estate sales, and (iii) it is not unreasonable to expect ultimate collection." 3.1 The AO noted that in the instant case, the fact that the assessee has produced the completion certificate from their Architects itself means that there is no existence of any significant uncertainty regarding consideration derived from the business. Also, there is reasonableness in expecting or estimating the ultimate collection when the said project has got completed. The Architect has certified that the Project has been completed at Plot Nos. 52 and 56, Wing A, B, C, D and E, at Khargar, Navi Mumbai, on 30th March, 2006, and Wing G, H and L on 26th June, 2006. Further, in respect of project at Airoli node, Navi Mumbai, Wing A, on Plot No. 1, Sector-19-A, the project was completed on 10th June, 2006. This, therefore, means that the assessee has already recognized the completion of project. He was in a position to submit complete details of sales and cost involved in its business of construction. 4. The AO thereafter, discussed AS 7 to decide a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tial flat has been fixed at ₹ 4,96,176. The flat has to be delivered to the purchaser within a specified period. The dates on which the consideration has to be paid have also been prescribed and so has the measurement and specifications of the flat. The only condition for termination of the agreement is if the purchaser fails to pay the consideration within the time specified. He also analyzed cl. 11 of the agreement which lays down that the builder shall not be responsible for any loss/damage/injury etc. for reasons beyond their control. In other words, all the risks of the said assets have been transferred to the purchaser vide this agreement. The only obligation of the builder is to complete the flat and handover the possession within 18 months of the agreement. Further according to cl. 19(a) specifically mentions that, other than the particular flat/shop/car parking space, the builder shall be deemed to be the owner until the property is transferred to the co-operative housing society. In other words, the ownership of the flat/shop/car parking space sold vide this agreement rests with the purchaser. 6. In view of the above, the learned CIT(A) was of the opinion that all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ised Accounting Standard (AS)-7, which is applicable to construction contractors and not to builders and developers. 4. In estimating a net profit ratio of 26.74 per cent under the percentage completion method as against a net profit ratio of 5 per cent as adopted by the AO. The net profit ratio of 26.74 per cent in any case is excessive. 5. Without prejudice to the above, the CIT(A) has erred in not granting the appellant deduction under s. 80-IB(10) of the IT Act (ITA), in respect of the estimated profits." 8. The learned counsel for the assessee submitted that this is the second year of operation. During the asst. yr. 2004-05, the assessee company has declared a loss of ₹ 5,63,501. He submitted that in the preceding year five projects were undertaken by the assessee company and all these projects were under construction at the end of the year and the WIP of the projects were shown at ₹ 4,29,50,093 which is as per p. 15 of the paper book. He submitted that in the preceding assessment year, the assessee in the notes to accounts under the head "Revenue recognition" has mentioned that the company is following AS 9 (Revised) revenue recognition issued ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... damages on account of natural causes i.e. lightning, explosion, flooding, riots and war etc. which are not in the control of the assessee. However the assessee is responsible for all the losses and damages caused during the course of construction activity, and even after these losses/damages, the assessee has to complete the project and, therefore, for this losses and damages the assessee is responsible. Referring to the cl. 19(A) of the said agreement (at p. 190 of the paper book) and referred to by the learned CIT(A), the learned counsel for the assessee submitted that as per the said clause, the purchaser shall have no claim in respect of open spaces, lobbies, stair-case, terraces etc. which shall remain the properties of the builders until the whole project is transferred to the proposed co-operative housing society and, therefore, there is nothing in the clause by virtue of which it can be referred that the risks and rewards are transferred to the purchaser, as the purchaser has the right to occupy only the flat which has been purchased by him. Referring to the cl. 32 of the agreement (which is at p. 193 of the paper book) the learned counsel for the assessee submitted that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taken any remedial measure under s. 263 or 147 for the asst. yr. 2004-05 and 2006-07 even after the order of the AO and learned CIT(A) for asst. yr. 2005-06 could not be controverted by the learned Departmental Representative We find the assessee in its notes to accounts for the year ended 31st March, 2004 at cl. 1(c) of notes has mentioned as under : "c. Revenue Recognition : The company is following AS 9 (Revised) Revenue Recognition issued by the Institute of Chartered Accountants of India for income recognition. Revenue is recognized following the principle of accounting standard issued by the Institute of Chartered Accountants of India, whereby the profit is recognized on the completion of projects when the risk of ownership is transferred to the customer." 12. Similarly we find for the impugned assessment year the assessee company, in the notes to accounts regarding revenue recognition, has mentioned identical notes. We find the AO, during the asst. yr. 2006-07 has also accepted the project completion method followed by the assessee and has not disturbed the income by making any estimated income on the work-in-progress. We also find merit in the submission of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reject the accounts under s. 145(3) on the ground that the assessee has not followed percentage completion method of accounting. 13.3 Now coming to the finding of the learned CIT(A) that all risks and rewards in the property sold as per the sale agreement has been transferred to the buyer, we find cl. 11 of the sale agreement (p. 189 of the paper book) which is referred to by the learned CIT(A) mentions loss or damages on account of natural causes i.e. lightning, earthquake, flooding, riots and war, etc. These are the losses which are not in the control of the assessee. However, the assessee is responsible for all the losses and damages caused during the course of the construction activity and even after these losses and damages, the assessee has to complete the project and therefore, for these losses and damages, the assessee is responsible. 13.4 Similarly we find cl. 19(A) of the sale agreement (p. 190 of the paper book) refers that the purchaser has no claim in respect of open spaces, lobby, staircase, terrace, etc. which shall remain the property of the builder until the whole project is transferred to the proposed co-operative housing society and, therefore, there is nothin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... being adjudicated. 13.11 The appeal filed by the assessee for the asst. yr. 2005-06 is accordingly allowed. ITA No. 686/Mum/2010; Asst. yr. : 2006-07 14. The grounds of appeal No. 1 (i) & 1 (ii) by the assessee read as under : "1. On facts and in circumstances of the case and in law, the CIT(A), has erred in : (i) Not granting deduction of ₹ 7,21,60,252 as claimed by the appellant under s. 80-IB(10) of the IT Act, in respect of the projects comprising of Gulmohar and Splendour constructed at Plot Nos. 52/20 and 56/20, Sector 20, Kharghar, Navi Mumbai. (ii) Not appreciating that s. 80-IB(10) of the IT Act is an incentive provision for economic growth and has to be interpreted liberally. In doing so, the AO as well as CIT(A) have not followed the principles in this regard as laid down by the apex Court in Bajaj Tempo vs. CIT (1992) 104 CTR (SC) 116: (1992) 196 ITR 188(SC)." 14.1 Facts of the case, in brief, are that for the impugned assessment year, the assessee filed its return of income showing profit from their project "Gulmohar" and "Splendor" which has been constructed at Plot Nos. 52/20 and 56/20, Sector-20, Khargar, Navi Mumbai. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e house for the purpose of "income from house property". Since some of the purchasers have purchased two or more such flats which are adjacent to each other and the total area exceeds 1000 sq. ft. the AO was of the opinion that the conditions prescribed under s. 80-IB(10) are not fulfilled. Since the assessee failed to comply with the specific conditions laid down in sub-cls. (a) and (c) of s. 80-IB(10), the AO, relying on a couple of decisions, held that the assessee is not entitled to claim the deduction under s. 80-IB(10) amounting to ₹ 7,07,88,251. The AO further noted that as per the provision of s. 80-IB(10), the project should be a housing project only. Since this project is approved by the local authority i.e. CIDCO as residential-cum-commercial project, the profit of the same is not entitled to deduction under s. 80-IB(10). Rejecting the various explanations given by the assessee and relying on a couple of decisions the AO rejected the claim made under s. 80-IB(10) of the IT Act. 17. Before the learned CIT(A) it was submitted that when the project was approved on 10th Oct., 2003, the restrictive conditions to commercial area were not there in the statute b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en terrace are to be excluded from the "built-up" area, the learned CIT(A) was of the view that the amended provision is applicable for asst. yr. 2005-06 and onwards and shall apply to the assessee as well and hence the AO was right in including the terraces in the "built-up area" which clearly falls under the definition of built-up area as provided under s. 80-IB(14)(a). Relying on a couple of decisions, the learned CIT(A) was of the opinion that taxing statutes have to be strictly construed and nothing can be read in it. Since the assessee in the instant case has not fulfilled the conditions mentioned in s. 80-IB(10), the learned CIT(A) rejected the various arguments advanced before him and upheld the action of the AO. 19. Aggrieved with such order of the learned CIT(A), the assessee is in appeal before us. 20. The learned counsel for the assessee submitted that various submissions given before the learned CIT(A) along with the copies of agreements were not considered by him properly. He submitted that the provisions of s. 80-IB(10)(d) restricting the built-up area of shops and other commercial establishments included in the housing project at 5 per cent or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applicable to the projects approved and commenced before 1st April, 2005. Referring to the decision of the Tribunal in the case of Asstt. CIT vs. Sheth Developers (P) Ltd. (supra) he submitted that it has been held that prior to 1st April, 2005, balcony would not form part of the built-up area. The definition of "built-up area" introduced by the Finance Act, 2005 was manifestly prospective. It has further been held in the said decision that where, any unit excluding the balcony area, was of more than 1,000 sq. ft., the assessee was entitled to the deduction under s. 80-IB(10) on pro rata basis, in respect of the flats of 1,000 sq. ft. or less and the deduction cannot be denied. 22. The learned Departmental Representative on the other hand, relied on the order of the learned CIT(A). 23. We have considered the rival submissions made by both the sides, perused the orders of the AO and the learned CIT(A) and the paper book filed before us. We have also considered the various decisions cited before us. From the body of the assessment order, we find the assessee during the impugned assessment year has shown the sales details for the year ending 31st March, 2006 which are as u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cable in respect of projects approved and commenced before 1st April, 2005. 27. We find merit in the above submissions of the learned counsel for the assessee. As regards the allegation of the Revenue that the commercial area in the project is more than 5 per cent, we find the issue now has been settled in view of the various decisions of the Co-ordinate Benches of the Tribunal, including the decision in the case of Brahma Associates (supra) which has been upheld by the Hon'ble Bombay High Court. 28. We find the Co-ordinate Bench of the Tribunal in the case of Shri Girdharilal K. Lulla where one of us (the Accountant Member) is a party vide ITA No. 4207/Mum/2009 order dt. 30th May, 2011 has held as under : "We have considered the rival submissions made by both the sides, perused the orders of AO and the CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the AO denied the benefit of deduction under s. 80-IB(10) of the Act on the ground that the commercial area in the project is 3,399 sq. ft. which is well above 2,000 sq. ft. or 5 per cent of the project which is one of the preconditions for c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... holding that the law as it existed in the asst. yr. 2004-05 when the assessee submitted its proposal for slum rehabilitation and the permission for carrying out the development was accorded on 17th Nov., 2003 and when the assessee commenced development is to be applied. Therefore the submissions of the learned Departmental Representative in this regard cannot be accepted. We are of the view that the legislature would not have intended to take away a vested right without clear words to that effect in the provisions of s. 80-IB(10) as amended by the Finance Act, 2005, w.e.f. 1st April, 2005. We therefore hold following the decision in the case of Saroj Sales Organisation (supra) that the law as it existed in the asst. yr. 2004-05 when the assessee submitted its proposal for slum rehabilitation and the permission for carrying out the development was accorded on 17th Nov., 2003 and when the assessee commenced development is to be applied.' 29. Since in the instant case, the project undisputedly was approved before 1st April, 2005 therefore the provisions of the old law will apply. Therefore, the order of the learned CIT(A) on this issue being in consonance with the decision of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ne party. Further there is no evidence on record to suggest that the assessee itself has advertised that the flats were of more than of 1,000 sq. ft. and that merely to get the benefit of deduction under s. 80-IB(10) he drew the plan in such a manner that each residential unit was shown as not more than 1,000 sq. ft. of built-up area. It is also not the case of the Revenue that each flat in the housing project undertaken by the assessee could not have been used as an independent or as a self contained residential unit not exceeding 1,000 sq. ft. of built-up area and there would be a complete habitable residential unit only if two or more flats are joined with each other which would ultimately exceed 1,000 sq. ft. of built-up area. Therefore, merely because some of the purchasers have purchased more than one flat and combined the same, the same in our opinion, will not disentitle the assessee to claim the deduction under s. 80-IB(10). 31. Further the condition that not more than one residential unit in the housing project is allotted to any person not being an individual has been inserted by the Finance (No. 2) Act, 2009 w.e.f. 1st April, 2010. Therefore, the allegation of the Reve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... grounds of appeal No. 1(i) and 1(ii) by the assessee are allowed. 34. The ground of appeal No. 1(iii) reads as under : "(iii) Not reducing the profits computed by the AO on percentage completion method in asst. yr. 2005-06 in respect of the projects'Splendour and Gulmohar from the total profits of ₹ 7,07,88,250 worked out from the said projects for asst. yr. 2006-07. This has led to double taxation of the said profits, as assessed by the AO once in asst. yr. 2005-06 and once again in asst. yr. 2006-07." 35. After hearing both the sides we find the grievance of the assessee is that the AO while computing the profit by rejecting the project completion method for the asst. yr. 2005-06 has not reduced the same from the profits of the projects for the asst. yr. 2006-07 for which it leads to double taxation of the same profits. We have already allowed the claim of the assessee in asst. yr. 2005-06 by accepting the project completion method followed by the assessee. Therefore, this ground raised by the assessee becomes infructuous and accordingly the same is dismissed. 36. In the result, the appeal filed by the assessee for the asst. yr. 2006-07 is partly allowed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... othe and Tilaknagar project the AO noted that there is no sale yet executed hence he did not estimate the profit on the same. 37.5 He noted that during asst. yr. 2005-06 his predecessor AO has rejected the project completion method followed by the assessee and estimated the income on the basis of percentage completion method which has been upheld by the learned CIT(A). The assessee has filed appeal before the Tribunal which is pending. Following the order of his predecessor, the AO adopted percentage completion method by rejecting the project completion method followed by the assessee and made addition of ₹ 3,00,97,024 to the total income of the assessee being 'Profit on incomplete projects.' In appeal, the learned CIT(A) upheld the action of the AO for which the assessee is in appeal before us. 38. After hearing both the sides, we find the above grounds by the assessee are identical to the grounds of appeal Nos. 1 to 3 in assessee's appeal for asst. yr. 2005-06. We have already decided the issue in favour of the assessee at paras 11 to 13.10 of the impugned order upholding the method of accounting followed by the assessee and deleting the estimated addition mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt occupancy certificate was issued on 1st Dec., 2006 the actual possession of residential flats in these wings could be handed over only in the next financial year as certain works on the amenities as provided were not upto the specifications as called for by the purchasers and hence work had to be redone on these to their satisfaction. It is only thereafter in the financial year ending 2008 that possession of these flats were handed over to the purchasers and revenue in respect of these sales was recognized by following the accounting standard. Even the occupancy certificate dt. 31st March, 2008 certifies that the part OC was given on 1st Dec., 2006. 2. In the certificate issued by the architect which is Annex. to the Form 10CCB it has been stated that I, J and K wings of Splendor have not been completed upto 31st March, 2007. The above clarification has been inadvertently missed in the said certificate as issued by the architect." 39.3 However, the AO was not satisfied with the explanation given by the assessee. He noted from the details furnished by the assessee that in respect of Gulmohar and Splender G & H the occupation certificate was received on 26th June, 2006 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce. 40.2 The learned counsel submitted that from the facts mentioned by the AO in the order it is clear that the assessee company declared the projects completed in the year when the projects are completed in all respects and possessions were given to the intending purchasers on receipt of the full payment against the agreement value and thereby, risk and rewards are transferred to the purchasers under the sale agreement. Accordingly, the assessee company has taken the two projects completed in the last year when the possessions are given to the intending purchasers though the occupancy certificate were received on 26th June, 2006 and 29th Sept., 2006 which fall in the asst. yr. 2007-08. Following the same analogy in respect of the project I, J&K Wings, though the occupancy certificate is received in this year on 1st Dec., 2006, but possessions were given in the next year after redoing some amenities as per specifications and income is declared in the next year i.e. asst. yr. 2008-09. 40.3 Without prejudice, he submitted that since the assessee company has claimed deduction under s. 80-IB(10) on this project by satisfying all the conditions, it does not affect the computation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngly allowed. 43. The grounds of appeal No. 4, 5 and 6 by the assessee are as under : "4. Upholding the view of the AO in not granting the appellant deduction claimed under s. 80-IB(10) of the IT Act (ITA) of ₹ 2,04,83,103, in respect of the projects Gulmohar and Splendour'Wings'A, B, C, D, E, which was constructed at Plot Nos. 52/20 and 56/20, Sector 20, Kharghar, Navi Mumbai. 5. Rejecting the appellant's plea that deduction under s. 80-IB(10) of the IT Act should be granted in respect of the profits estimated by the AO, which were added to the total income during the course of the assessment. 6. Not appreciating the s. 80-IB(10) is an incentive provision for economic growth and has to be interpreted liberally. In doing so, the AO has not followed the principles in this regard as laid down by the apex Court in Bajaj Tempo vs. CIT (supra)." 44. Facts of the case in brief are that the AO during the course of assessment proceedings observed that assessee has shown profits from their projects "Gulmohar" and "Splendor" which have been constructed at Kharghar, Navi Mumbai and earned profits amounting to ₹ 2,04,83,103. This pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earned CIT(A) following his order for asst. yr. 2006-07 upheld the action of the AO for which the assessee is in appeal before us. 47. After hearing both the sides we find the grounds raised by the assessee in the impugned appeal are identical to grounds in ITA No. 6861/Mum/2010 for asst. yr. 2006-07. We have already decided the issue in favour of the assessee at paras 23 to 33 of the impugned order. Following the same ratio, the order of the learned CIT(A) on this issue is set aside and the grounds raised by the assessee are allowed. 48. Grounds of appeal No. 7 by the assessee reads as under : "Upholding the view of the AO for treating a sum of ₹ 8,01,97,900 as deemed dividends under s. 2(22)(e) of the IT Act, thereby assessing the said sum as the appellant's income." 48.1 Facts of the case in brief are that during the course of assessment proceedings the AO observed that assessee company (HCPL) has taken unsecured loan from Haware Engineers & Builders (P) Ltd. (HEBPL) amounting to ₹ 8,01,97,900 which was squared up during the year and there existed balance of ₹ 13,481 at the end of the year. The balance sheet of HEBPL shows reserve of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urpose of business transactions proposed to be entered into between the two companies i.e Haware Construction (P) Ltd. (HCPL) and HEBPL. It was also stated that the payment made by HEBPL to HCPL and from HCPL to HEBPL are such payments on account of the proposed purchase of the relevant projects. It was submitted that since the terms and other aspects of the project were not finalized to enter into an agreement, therefore, in the intervening period as a commercial expediency, the net balance was worked out and interest on the difference was levied. The assessee also distinguished the provisions of s. 2(22)(e) stating that s. 2(22)(e) creates a fiction bringing in amounts paid otherwise than as dividends into the net of dividends and as per cl. (ii) of s. 2(22)(e) the payment by a closely held company to a shareholder or to any concern etc. should be by way of advance or loan. Relying on a couple of decisions, it was submitted that additions made of ₹ 8,01,97,900 under s. 2(22)(e) may be deleted. 48.3 However, the learned CIT(A) was not convinced with the arguments advanced before him and upheld the action of the AO. While doing so he noted that the facts on record do not sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... est on that and accordingly, a sum of ₹ 2,96,896 was the interest payable to HEBPL. Therefore, these amounts are paid and received towards business transactions entered between both the companies. 49.3 Relying on the decision of the Hon'ble Bombay High Court in the case of CIT vs. Nagindas M. Kapadia (1989) 75 CTR (Bom) 161: (1989) 177 ITR 393(Bom) he submitted that as per the provisions of s. 2(22)(e), business transactions are not to be treated as deemed dividend. 49.4 He submitted that since the agreements were yet to be entered, the transactions were treated as ICDs. Relying on the decision of the Co-ordinate Bench of the Tribunal in the case of Bombay Oil Industries Ltd. vs. Dy. CIT (2009) 28 SOT 383(Mumbai), he submitted that ICDs do not come within the purview of deemed dividend under s. 2(22)(e). 49.5 He submitted that the Tribunal in the case of the said decision has held that there is distinction between deposits vis-à-vis loans/advances. Sec. 2(22)(e) enacts a deeming fiction whereby the scope and ambit of the word 'dividend' has been enlarged to bring within its sweep certain payments made by a company as per the situations enumerated in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the account for HEBPL is of ₹ 13,481. 49.9 Referring to a number of decisions he submitted that no deemed dividend under s. 2(22)(e) can be taxed in the hands of the company. 49.10 The learned counsel for the assessee referring to pp. 227 to 228 of the paper book drew the attention of the Bench to the list of shareholders of HEBPL and HCPL on 31st March, 2007 and submitted that the assessee company is not a registered shareholder of HEBPL. Referring to the certificate issued by the assessee company (paper book p. 229), he submitted that there are no transactions with Ujjwala Haware and during the year ended on 31st March, 2007 they have paid only remuneration of ₹ 10,50,000 to her. Referring to the decision of the Special Bench of the Tribunal in the case of CIT vs. Bhaumik Colour (P) Ltd. (2009) 120 TTJ (Mumbai)(SB) 865: (2009) 18 DTR (Mumbai)(SB) 451: (2009) 118 ITD 1(Mumbai)(SB) he submitted that the Special Bench in the said decision has held that addition of deemed dividend can be made in the hands of the person who is a registered shareholder as well as a beneficial shareholder. It has been held in the said decision that deeming provision as it applies to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be made in the hands of the assessee as the payments made by the company MKPTL though routed through the two firms, were in fact for the benefit of the assessee who had purchased RBI Relief Bonds worth ₹ 26.35 crores by withdrawing sums from his capital account with the two firms resulting into the debit balance of ₹ 8.18 crores." He accordingly submitted that no addition can be made under s. 2(22)(e)of the Act in the hands of the assessee company. 50. The learned Departmental Representative, on the other hand, heavily relied on the orders of AO and CIT(A). 51. We have considered the rival arguments made by both the sides, perused the order of AO and the learned CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. In the instant case, we find the AO treated the sum of ₹ 8,01,97,900 as deemed dividend under s. 2(22)(e) of the IT Act in the hands of the assessee company on the ground that Mrs. Ujjwala Haware holds more than 20 per cent equity capital in HEBPL and HCPL and that the assessee has taken unsecured loan amount of ₹ 8,01,97,900 during the year from HEBPL which has got free r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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