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TMI Blog2022 (12) TMI 939X X X X Extracts X X X X X X X X Extracts X X X X ..... t of time. The resultant profit were also claimed to have been shared equally as provided in MOU to support the inherent character of money received from Landspace. These facts clearly vindicates the claim of the assessee that the amount received was in consideration of transfer of rights in the property allotted and thus cannot be regarded as a loan transaction of ordinary nature. To support the nature of money received from Landspace, the assessee claims that such MOU has been acted upon. Where the rights in the property was sold and profits have been shared as business receipt by Landspace, the other considerations fades into insignificance. CIT(A), has examined the issue threadbare and has rightly concluded that the amount obtained from Landspace is in the nature of business transaction outside the purview of Section 2(22)(e). Mere declaration in the financial statement of amount received as inter corporate loan is neither here nor there. The nature of amount received is vouched by the subsequent actions. Thus, propriety of such explanation can hardly be questioned. Hence, without further delineation of factual matrix, we see no perceptible justification in the allegat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2)(e) of the Act should not be applied for the receipt of the loan from the lender co. during the year. On enquiry, the Assessing Officer found that the assessee has received an amount of Rs.10.87 lakhs in the earlier years and further received 253.75 lakhs during the year in multiple trenches. The assessee has also returned an amount of Rs.92,27,713/- through banking channel resulting in net outstanding amount of Rs.1,72,35,064/- as outstanding payable to lender namely Landspace. The impugned liability of Landspace was classified as received from Landspace in the nature of loan and advances from related parties. Consequently having regard to the provisions of Section 2(22)(e) of the Act, the Assessing Officer made enquiries with the assessee in this regard. In response, the assessee submitted that the amount received from the Landspace was not in the nature of any loan or advance simplicitor but was received in consideration of sharing 50% right in two real estate properties unit aggregating to Rs.6.51 crore allotted to the assessee in an upcoming project, viz., Sun Court Apartments at Greater Noida being developed by Jai Prakash Associates Ltd. (Builders). It was stated that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us made to the total income returned by the Assessee under the shelter of S. 2(22)(e) of the Act. 7. Aggrieved by the additions made under Section 2(22)(e) by the Assessing Officer, the assessee preferred appeal before the CIT(A). Before the CIT(A), the assessee reiterated its stance and contended that the Assessing Officer has invoked the provisions of Section 2(22)(e) divorced of the factual matrix and applicable law. 7.1 It was essentially contended that the AO has failed to consider the direct and circumstantial evidences filed in corroboration of explanation furnished before him during the assessment proceedings which clearly proved that the amount in question received by the assessee denotes the consideration for transfer of 50% rights in the properties acquired by the Assessee. It was pointed out that the rights in such properties were alienated to third party in the subsequent years and the profits accruing as a result of such alienation/transfer were also equally shared between the assessee company and Landspace in subsequent years in sync with their respective rights. 7.2 In this backdrop, the assessee contended before the CIT(A) that where the payment received b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reveals that the appellant company agreed with M/s. Landspace Construction Ltd. to acquire 50% rights in the aforesaid two properties subject to payment of 50% of total cost of the said properties. It was further agreed that the profit/loss would be shared in the ratio of 50:50 on the sale of aforesaid properties before or after the completion of construction of the said properties. In pursuance to this memorandum only, the Landspace Construction paid its share amounting to Rs. 3.20 crores (Rs. 2.53 crores during the year), out of the total cost of Rs. 6.1 crores. Thus, the payments received by appellant during the year from M/s Landspace was in the nature of advance/share towards purchase of property, not as a loan as concluded by AO during the assessment proceedings. The subsequent events also confirm the nature of transactions that it was purely a commercial transaction, not the loan transactions. The Agreement to Sell dated 13.07.2015, in respect of aforesaid two flats at Sun Court Apartments, has also been entered into between M/s. Garrison Developers Pvt. Ltd, a purchaser and appellant alongwith M/s Landspace Construction Pvt. Ltd, as seller wherein shares in profit of both ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tended that the purported MOU between group entities seeking to demonstrate a transfer 50% right in the so called property in Sun Court is sham and was not proved to have been acted upon in the subsequent years. It was contended that if the claim of the assessee towards existence of MOU for sharing right in the property is taken at face value, there was no warrant to declare the amount received as Inter-Corporate Loan. The assessee in its books has appropriated such purported considerations for sharing rights against the properties provisionally allotted to the Assessee by Builder. It is also not known as to how the consideration purportedly paid to builder against provisional allotment has been reflected in the audited financial statement. The onus was always on the Assessee to demonstrate the reasons for making wrong declarations in the audited financial transactions and suppress the true nature of transaction, now it proposes to convass. 10. Adverting further, the ld. DR pointed out that the Assessing Officer has examined the issue threadbare and submitted that the ledger account of Land Space in the books of assessee would show that an amount of Rs.92,27,713/- has been repai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f reasons and will not vitiate the real character of business transactions. It was next submitted that the common rights in these two properties were transferred to one M/s. Garrison Developers Pvt. Ltd. by executing Agreement to Sale (ATS) dated 13.07.2015. the ATS also acknowledges the presence of Landspace as third party for transfer of its 50% right. It was submitted that total cost involved for purchase of two properties was Rs.6.15crore approximately and Landspace has paid its share of Rs.3.20 crore approximately (Rs.2.53 crore) during the year towards acquisition of right. The resultant profits of Rs.1.53 crore on sale of rights to M/s. Garrison was also divided by the assessee and the Landspace equally in the subsequent year of sale. The ld. counsel thus submitted that mere inadvertent /wrong disclosure in the financial statement will not cast shadow the real character and in such circumstances, the book entries made in the particular manner is not decisive to determine the real character in the light of the judgment of Hon ble Supreme Court in Kedarnath Jute Mfg. Co. Ltd. vs. CIT (1971) 82 ITR 367 (SC). 15. The ld. counsel for the assessee thus submitted that in the abs ..... X X X X Extracts X X X X X X X X Extracts X X X X
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