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TMI Blog2021 (9) TMI 804X X X X Extracts X X X X X X X X Extracts X X X X ..... ction of purchase of property is purely for the benefit of the company s business and is for commercial expediency. Since there is no loan/advance given to the assessee from the said company and the alleged transaction is for company s own business and commercial expediency, there was no reason to invoke the provisions of section 2(22)( e). In the instant case since no land/advance was given to the assessee from the said company, in which the assessee is a director and, therefore, the ld.AO erred in invoking the provisions of section 2(22)(e) - Decided in favour of assessee. - ITA No. 2401/Kol/2019 - - - Dated:- 15-9-2021 - Shri A.T Varkey, Judicial Member And Shri Manish Borad, Accountant Member For the Appellant : Shri Siddharth Jhajharia, FCA, Ld. AR For the Respondent : Smt. Ranu Biswas, Addl.CIT, Ld.DR ORDER PER MANISH BORAD, AM. This appeal filed by the assessee pertaining to the A.Y. 2014-15 is directed against the order of ld. Commissioner of Income-tax (Appeals)-11, Kolkata dated 31-07-2019 vide no. 282/CIT(a)-11/CIR- 38/16-17/MID which is arising out of the assessment order framed u/s 143(3) of the Income Tax Act dated 30-12-201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perty at ₹ 78,41,566/- is liable to be added in the hands of the assessee as deemed dividend u/s.2(22)( e ) of the Act. Accordingly, income of assessee assessed at ₹ 93,01,940/-. Aggrieved, the assessee preferred an appeal before the ld. CIT(A), but failed to succeed. 4. Now, the assessee is in appeal before this Tribunal. 5. Ld. Counsel for the assessee submitted that the said property costing of ₹ 1,46,82,291/- was purchased by the said company, M/s. SDCPL. Payment was made by the said company through banking channel. The said land is shown as fixed asset and accounts are audited. The property was purchased in the name of director to save stamp duty charges to some extent but no advance was given by M/s. SDCPL to its director. 6. The Ld. Counsel for the assessee submitted that no loan was received by the assessee from the company, M/s. SDCPL. The property was purchased in the name of the assessee and the other person only on behalf of the assessee company and also to save the stamp duty charges. The said property is duly accounted for in the books of account of the company (M/s.SDCPL) and shown as fixed asset consistently. In support of the conten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... what really matters is who holds the legal title to the land in question. The clear answer is, the two Directors, including the appellant, as individuals hold a legal title to the land in question. Seen in this perspective, it transpires that the directors acquired the said landed property in their individual names for which the private limited company incurred a liability. Therefore, in my view, the payments made by the Private Limited Company was actually towards the liability created by the Directors in the books of the company for acquiring an asset individually in their names. In other words, the payments for purchase of land made by the Private Limited Company was an indirect way of paying the considerations on behalf of the Directors. In my view, this transaction comes directly within the ambit of section 2 (22) (e) of the IncomeTax Act 1961. 12. I, for the reasons discussed above, hold that the amount paid by the company was in the form of deemed dividend as envisaged in section 2(22) (e) of the Act. Therefore, the Id. AO is directed to treat an amount of loan repaid on behalf of the Directors by the company as deemed dividend paid by it to the Directors. The amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t dividend does not include- (i) a distribution made in accordance with subclause (c) or subclause (d) in respect of any share issued for full cash consideration, where the holder of the share is not entitled in the event of liquidation to participate in the surplus assets ; (ia) a distribution made in accordance with subclause (c) or subclause (d) in so far as such distribution is attributable to the capitalised profits of the company representing bonus shares allotted to its equity shareholders after the 31st day of March, 1964, and before the 1st day of April, 1965 ; (ii) any advance or loan made to a shareholder or the said concern by a company in the ordinary course of its business, where the lending of money is a substantial part of the business of the company ; (iii) any dividend paid by a company which is set off by the company against the whole or any part of any sum previously paid by it and treated as a dividend within the meaning of subclause (e), to the extent to which it is so set off; (iv) any payment made by a company on purchase of its own shares from a shareholder in accordance with the provisions of section 77A of the Companie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... words in this provision as applicable to the issue in question are loan or advance and individual benefit . So we need to examine that whether in the instant case there is a loan or advance to the assessee from the company or any individual benefit has been given to the assessee by the company. 11. Examining the facts of the instant case, we find that payment of purchase of property was made by the said company through banking channel. The assessee has not shown his share of property in his individual balance sheet, Land Building(KCT) Ledger Account in the books of M/s. SDCPL, placed at page-4 of the paper book is showing all the details of payments made to acquire the said property. Board Resolution has been passed in the Board Meeting held on 19-10-2013 unanimously resolving that for the basic developments of the company s business, fund required to purchase assets for its extension at Choto Tengra, Kharagpur, due to some technical problem, land will be purchased in the name of two directors of the said company and purchase land building will be the assets of the said company. No liability in the name of individual of directors will accrue by this transactions . Fur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the same is shown as Investment in Godrej Boyce Mfg. Co. Ltd. 5. We noted that the initial amount of ₹ 11,16,6201was paid by Vaspar IT Services Pvt. Ltd. on 08.12.2011 to Godrej on behalf of Vision Marketing Information Services Pvt. Ltd. and the same was shown as loan to Vision Marketing Information Services Pvt. Ltd. in the books of Vaspar IT Services Pvt. Ltd. and also in the Balance Sheet of Vaspar IT Services Pvt. Ltd, as on 31.03.2012 and correspondingly. We noted from the facts of the case that Vision Marketing Information Services Pvt. Ltd. has also shown loan taken from Vaspar IT Services Pvt. Ltd. as on 31.03.2012. All these accounting entries having been passed in the books of account of these companies clearly show the intention that the property was from inception beneficially belonged to Vision Marketing Information Services Pvt. Ltd. and not to the assessee, who merely held in her name as a Director for and on behalf of Vision Marketing Information Services Pvt. Ltd. The intention of parties is duly reflected in the treatment given in the books of account as those entries speak out the real intention underlying those entries. We also note ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Supreme Court in the case of CIT vs. Podar Cement (P.) Ltd [1997] 226 ITR 625 (SC), wherein the concept of beneficial owner is explained. The facts before the Hon'ble Supreme Court was that some flats were let out to various persons and rental income from these flats were included in the return of income assessable as income from other sourced under section 56 of the Act as the assessee company was not the legal owner of the property in the flats. The assessee contended that such a claim was put forward mainly in the ground that the title of the property has not been conveyed to the cooperative society which was affirmed by the purchasers of the flats and that so long as the ownership was not transferred in the name of the assessee. The rental income from the flats could not be assessed as income from house property. Hon'ble Supreme Court after considering the entire legal jurisprudence finally considered the issue vide Para 53 and 54 as under: 53. We are conscious of the settled position that under the common law owner means a person who has got valid title legally conveyed to him after complying with the requirements of law such as Transfer of Property Act, Reg ..... X X X X Extracts X X X X X X X X Extracts X X X X
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