DCIT, New Delhi V. M/s. International Land & Developers Pvt. Ltd., New Delhi

ITA 1157/DEL/2016

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 1550 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 2 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-05-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2012-2013
• Appeal Filed On: 03-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S N MEENA
• Keywords: Valuation report
• Section: 2(22)(e); 6; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C, NEW DELHI BEFORE SH. AMIT SHUKLA, JUDICIAL MEMBER DR. B. R. R. KUMAR, ACCOUNTANT MEMBER ITA NO. 1157/DEL/2016 : ASSTT. YEAR : 2012-13 DY. COMMISSIONER OF INCOME TAX, CIRCLE-12(2), NEW DELHI VS M/S INTERNATIONAL LAND & DEVELOPERS PVT. LTD., B-418, NEW FRIENDS COLONY, NEW DELHI (APPELLANT) (RESPONDENT) PAN NO. AABCI5518F ASSESSEE BY : SH. RUSHABH MEHTA, CA REVENUE BY : SH. S. N. MEENA, SR. DR DATE OF HEARING: 12.03.2020 DATE OF PRONOUNCEMENT: 14.05.2020 ORDER PER DR. B. R. R. KUMAR, ACCOUNTANT MEMBER: THE PRESENT APPEAL HAS BEEN FILED BY THE REVENUE A GAINST THE ORDER OF THE LD. CIT(A)-4, NEW DELHI DATED 28.1 2.2015. 2. FOLLOWING GROUNDS HAVE BEEN RAISED BY THE REVENU E: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWA NCE MADE ON ACCOUNT OF SHARE CAPITAL LOSS OF RS. 1,27,35,000/- U/S 68 OF THE ACT. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, LD. CIT(A) ERRED IN DISREGARDING THE FACT THAT WORTH OF THE ASSESSEE, SHARE CAPITAL AND OTHER LONG TERM LIABILITIES WERE NEGATIVE AND THAT THE ASSESSE E HAD NO ASSETS ON WHICH PREMIUM OF SHARES CAN BE VALUED AT RS. 90/- AS AGAINST FACE VALUE OF RS. 10. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, LD. CIT(A) ERRED IN NOT APPRECIATING THE FACT THAT THE ASSESSEE DOES NOT HAVE ANY VALUATION REPORT TO ITA NO. 1157/DEL/2016 INTERNATIONAL LAND & DEVELOPERS PVT. LTD. 2 SUBSTANTIATE VALUE OF PREMIUM OF SHARES AT RS. 90/- AS AGAINST FACE VALUE OF RS. 10. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, LD. CIT(A) HAS ERRED IN DELETING THE ADDITION MADE U/S 2(22)(E) OF THE ACT AMOUNTING TO RS. 1,27,00,000/-. 5. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, LD. CIT(A) ERRED IN NOT APPRECIATING THE FACTS THAT ASSESSEE HAD TAKEN ADVANCES FROM M/S ALM INFOTECH CITY PVT. LTD. & M/S ALM HOUSING & CONSTRUCTION PVT. LTD. AMOUNTING TO RS. 1,27,00,000 /- AGAINST PURCHASE OF LAND AND CONSTRUCTION OF IMMOVABLE PROPERTY, HOWEVER, ASSESSEE DID NOT PURCHASED ANY PROPERTY. 6. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, LD. CIT(A) DISREGARDED THE FACT THAT THE ADVANCE GIVER COMPANIES I.E. M/S ALM INFOTECH CITY PVT. LTD. & M/ S ALM HOUSING & CONSTRUCTION PVT. LTD. ARE NOT ENGAGE D IN THE BUSINESS OF LENDING AND THAT BOTH THE COMPANIES HAD SUFFICIENT ACCUMULATED PROFIT AND THE FACT THAT SH. ALIMUDDIN IS THE COMMON DIRECTOR IN A LL THE THREE COMPANIES (INCLUDING ASSESSEE COMPANY) HAVING SUBSTANTIAL INTEREST MORE THAN THE PRESCRIBE D LIMIT. ADDITION U/S 68: 3. THE ASSESSING OFFICER MADE ADDITION ON ACCOUNT O F SHARE PREMIUM ON THE GROUNDS THAT THE ASSESSEE HAS NOT F ILED THE VALUATION REPORT PERTAINING TO THE VALUE OF THE LAN D FOR WHICH SHARE PREMIUM @ RS.90/- PER SHARE HAS BEEN RECEIVED . THE RELEVANT PART OF THE ASSESSMENT ORDER IS AS UNDER: DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT IS NOTICED THAT THE ASSESSEE COMPANY HAD ISSUED 1,41,500 SHARES OF FACE VALUE OF RS.10/- EACH AT A PREMIUM OF RS.90/- PER SHARE. THE ASSESSEE WAS ASKED TO EXPLAIN ON WHAT BASIS IT HAS VALUED ITS ITA NO. 1157/DEL/2016 INTERNATIONAL LAND & DEVELOPERS PVT. LTD. 3 SHARE WITH REFERENCE TO ASSETS AND LIABILITIES OF T HE ASSESSEE COMPANY. THE ASSESSEE WAS ALSO ASKED TO PROVE THE I DENTITY, CREDITWORTHINESS AND GENUINENESS OF THE PARTIES WHO HAVE SUBSCRIBED THE ABOVE SHARE PREMIUM. IN RESPONSE, TH E ASSESSEE VIDE LETTER DATED 11.02.2015 HAS SUBMITTED AS UNDER : DURING THE YEAR UNDER CONSIDERATION ASSESSEE COMPAN Y HAD ISSUED 1,41,500 SHARES OF FACE VALUE OF RS.10/- PER SHARE AT A PREMIUM OF RS.90/- PER SHARE. IN FACT DURING THE YEAR UNDER CONSIDERAT ION ASSESSEE COMPANY HAD PURCHASED AGRICULTURAL LAND FOR THE COST OF RS. 3,19,87,955/- AT VILLAGE KHERKI DAULA, FURTHER, IT HAD VENTURED INTO A PROJE CT FOR CONSTRUCTION OF A MULTI STORIED RESIDENTIAL PROJECT IN VILLAGE DUDAER A AND HARIHERA IN HARYANA FOR THIS PURPOSE A SUM OF RS.4,77,00,000/- WERE PAI D BY THE ASSESSEE COMPANY FOR COLLABORATION OF THE SAME. IN VIEW OF T HE VALUE OF THE PROJECTS VENTURED AND INCREASE IN AGRICULTURAL LAND, PARTICU LARLY IN VIEW OF THE FUTURE PROSPECTS OF THE BUSINESS VENTURE, THE COMPA NY HAD ENTERED INTO THE VALUE OF ASSESSEE COMPANY SHARES WERE ESTIMATED AT RS.100/- PER SHARE INCLUSIVE OF RS.90/- PER SHARE AS PREMIUM. THE ABOVE SUBMISSION OF THE ASSESSEE HAS BEEN CONSI DERED BUT NOT FOUND TO BE TENABLE IN VIEW OF THE FACT THAT TH E WORTH OF THE ASSESSEE BEFORE TAKING THIS PREMIUM, SHARE CAPITAL AND OTHER LONG TERM LIABILITIES WAS NEGATIVE. THEREFORE, THE ASSESSEE HAS NO ASSETS ON WHICH PREMIUM OF SHARES CAN BE VALUED AT RS. 90/- AS AGAINST FACE VALUE OF RS. 10/-. FURTHER, THE ASS ESSEE HAS ALSO NOT FURNISHED ANY VALUATION REPORT IN ITS SUPPORT. THEREFORE, THE ASSESSEE HAS TAKEN HIGHER PREMIUM VALUE. THE ASSESS EE'S CASE IS SQUARELY COVERED WITHIN THE MEANING OF SECTION 6 8 OF THE IT ACT AND THE EXPLANATION OFFERED BY THE ASSESSEE IS NOT ACCEPTABLE. THEREFORE, THE PREMIUM TAKEN BY THE ASS ESSEE IS ADDED U/S 68 OF THE IT ACT. THEREFORE, THE AMOUNT O F RS. 1,27,35,000/- IS HEREBY DISALLOWED AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. ITA NO. 1157/DEL/2016 INTERNATIONAL LAND & DEVELOPERS PVT. LTD. 4 4. THE LD. CIT (A) DELETED THE ADDITION ON THE GROU NDS THAT THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF T HE TRANSACTION HAS BEEN PROVED BY THE ASSESSEE AND THE RE WAS NO MATERIAL BEFORE THE REVENUE TO ASSUME THAT IT WAS T HE ASSESSEES OWN MONEY THAT HAS COME BACK TO THE SYST EM IN THE FORM OF SHARE PREMIUM. 5. BEFORE US, THE LD. DR RELIED ON THE ORDER OF THE ASSESSING OFFICER WHILE THE LD. AR SUPPORTED THE ORDER OF THE LD. CIT (A). 6. HEARD THE ARGUMENTS OF BOTH THE PARTIES AND PERU SED THE MATERIAL AVAILABLE ON RECORD. 7. WE FIND THAT THE SHARE PREMIUM OF RS. 90/- PER S HARE HAS BEEN CONTRIBUTED BY THE SHARE HOLDERS OWING TO VARI OUS FACTS THAT THE COMPANY HAD PURCHASED THE LAND FOR A COST OF RS.3,19,87,955/- AND ALSO VENTURED INTO A PROJECT F OR CONSTRUCTION OF MULTISTORIED RESIDENTIAL PROJECT AN D PAID AN AMOUNT OF RS.4,77,00,000/- TO THE COLLABORATOR. FOR THE SAID MULTISTORIED RESIDENTIAL PROJECT, THE APPROVALS HAV E BEEN GIVEN ON 04.06.2013 AND ON 23.10.2013 VIDE LICENCE NO. 44 /2013 AND 89/2013. THUS, IT CAN BE CONVENIENTLY HELD THAT THE PREMIUM PAID BY THE SHARE HOLDERS IS NOT WITHOUT A PROPER R EASONS. THE COMPANY IS IN POSSESSION OF THE LAND AND ALSO GOING AHEAD WITH DEVELOPMENT OF RESIDENTIAL COMPLEX WHICH ARE REASON S SUFFICIENT FOR PAYMENT OF THE PREMIUM. HENCE, WE ARE UNABLE TO CONCUR WITH THE FINDING OF THE ASSESSING OFFICER THAT THE WORTH OF THE ASSESSEE AT THE TIME OF ISSUE OF SHARES WAS NEGATIV E. THE AO HAS IGNORED THE FACT ON RECORD THAT THE ASSESSEE HA S PURCHASED LAND AT THE COST OF RS.3.19 CRORES AT VILLAGE KHIRK I DAULA WHICH ADEQUATELY SUPPORTS THE SHARE PREMIUM RAISED BY THE ASSESSEE. ITA NO. 1157/DEL/2016 INTERNATIONAL LAND & DEVELOPERS PVT. LTD. 5 THERE IS NO IOTA OF EVIDENCE ABOUT THE CONCEALMENT OR PLOUGH BACK OF UNDISCLOSED INCOME TO THE ASSESSEE. FURTHER , THE ASSESSING OFFICER HAS NOT DISPUTED THE IDENTITY, GE NUINENESS AND CREDITWORTHINESS OF THE SHARE HOLDERS. HENCE, THE I NVOCATION OF THE PROVISIONS OF SECTION 68 OF THE INCOME TAX ACT, 1961 FOR THE SIMPLE REASON OF NON FILING THE VALUATION REPORT BY THE ASSESSEE AND BY NOT REFERRING THE COST OF THE LAND TO THE DV O, AND WITHOUT BRINGING ANY MATERIAL ON RECORD TO FULFILL THE CRITERIA OF SECTION 68, CANNOT BE JUSTIFIED IN THIS CASE. ADDITION U/S 2(22)(E): 8. DURING THE YEAR UNDER CONSIDERATION, IT WAS OBSE RVED BY THE AO THAT THE ASSESSEE COMPANY HAS RECEIVED AN AM OUNT OF RS. 1,13,00,000/- AND RS. 14,00,000/- FROM M/S AIM INFOTECH CITY PVT. LTD. AND M/S AIM HOUSING CONSTRUCTION PVT . LTD RESPECTIVELY AS ADVANCE AGAINST PURCHASE OF LAND AN D FOR THE PURPOSE OF CONSTRUCTION. AGAINST THESE TRANSACTIONS , THE ABOVE COMPANIES HAVE EXECUTED AGREEMENTS. THE AO NOTICED THAT THE ASSESSEE DID NOT PURCHASE ANY PROPERTY NOR STARTED ANY CONSTRUCTION ACTIVITY. IT WAS NOTICED THAT BOTH THE ABOVE COMPANIES ARE RELATED COMPANIES TO THE ASSESSEE COM PANY BY THE VIRTUE OF A COMMON DIRECTOR SHARE HOLDER. FROM THE PERUSAL OF THE SHARE HOLDING PATTERN OF THE ASSESSEE COMPAN Y AND THE ABOVE TWO COMPANIES, THE AO NOTICED THAT ONE OF THE DIRECTOR SH. ALIMUDDIN IS THE COMMON DIRECTOR IN ALL THE THR EE COMPANIES HAVING SUBSTANTIAL INTEREST AND HELD THAT THE AMOUN T RECEIVED FROM THE TWO COMPANIES IS LIABLE TO BE TAXED U/S 2( 22)(E) OF THE ACT. ITA NO. 1157/DEL/2016 INTERNATIONAL LAND & DEVELOPERS PVT. LTD. 6 9. THE LD. CIT (A) DELETED THE ADDITION ON THE GROU NDS THAT THE ADVANCES WERE MADE PURELY FOR COMMERCIAL CONSID ERATION AND COMMERCIAL EXIGENCIES. 10. BEFORE US, THE LD. DR RELIED ON THE ORDER OF TH E ASSESSING OFFICER WHILE THE LD. AR SUPPORTED THE ORDER OF THE LD. CIT (A). 11. HEARD THE ARGUMENTS OF BOTH THE PARTIES AND PER USED THE MATERIAL AVAILABLE ON RECORD. 12. THE PROVISIONS OF SECTION 2(22)(E) READS AS UND ER: (E) ANY PAYMENT BY A COMPANY, NOT BEING A COMPANY IN WHICH THE PUBLIC ARE SUBSTANTIALLY INTERESTED, O F ANY SUM (WHETHER AS REPRESENTING A PART OF THE ASSETS OF THE COMPANY OR OTHERWISE) [MADE AFTER THE 31ST DAY OF MAY, 1987, BY WAY OF ADVANCE OR LOAN TO A SHAREHOLDER, BEING A PERSON WHO IS THE BENEFICIAL OWNER OF SHARES (NOT BEING SHARES ENTITLED TO A FIX ED RATE OF DIVIDEND WHETHER WITH OR WITHOUT A RIGHT TO PARTICIPATE IN PROFITS) HOLDING NOT LESS THAN TEN P ER CENT OF THE VOTING POWER, OR TO ANY CONCERN IN WHIC H SUCH SHAREHOLDER IS A MEMBER OR A PARTNER AND IN WHICH HE HAS A SUBSTANTIAL INTEREST (HEREAFTER IN T HIS CLAUSE REFERRED TO AS THE SAID CONCERN)] OR ANY PAYMENT BY ANY SUCH COMPANY ON BEHALF, OR FOR THE INDIVIDUAL BENEFIT, OF ANY SUCH SHAREHOLDER, TO THE EXTENT TO WHICH THE COMPANY IN EITHER CASE POSSESSE S ACCUMULATED PROFITS. 13. AS PER THE PROVISIONS OF THE ACT IT NEEDS TO ME ET THE CONDITIONS IN THE INSTANT CASE THAT SH. ALLIMUDIN S HOULD HAVE BEEN A SHARE HOLDER IN THE COMPANIES PAYING THE AMO UNT AND ALSO HE SHOULD HAVE BEEN HAVING A SUBSTANTIAL INTER EST IN THE ASSESSEE COMPANY. SECTION 2(32) REFERS TO PERSON WH O HAS A SUBSTANTIAL INTEREST IN THE COMPANY IN RELATION TO A COMPANY MEANS A PERSON WHO IS THE BENEFICIAL OWNER OF THE S HARES NOT ITA NO. 1157/DEL/2016 INTERNATIONAL LAND & DEVELOPERS PVT. LTD. 7 BEING SHARES ENTITLED TO A FIXED RATE OF DIVIDEND W HETHER WITH ARE WITHOUT A RIGHT TO PARTICIPATE IN PROFITS CARRY ING NOT LESS THAN 25% OF VOTING POWER. FURTHER, IN ORDER TO TAX THE RECEIPT, IT HAS TO BE PROVED THAT THE AMOUNTS RECEIVED HAS B EEN UTILIZED BY THE ASSESSEE COMPANY COULD HAVE BEEN DISTRIBUTED AS DIVIDEND BY THE LENDING COMPANY. WE FIND THAT THIS IS NOT THE FACT IN THE CASE OF THE INSTANT ASSESSEE. COUPLED W ITH THIS FACT, SINCE, IT HAS BEEN PROVED THAT THE ADVANCES ARE GIV EN FOR THE BUSINESS PURPOSE, WE HOLD THAT THE PROVISIONS OF SE CTION 2(22)(E) OF THE ACT ARE NOT ATTRACTED IN THE CASE O F THE ASSESSEE. 14. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 14/05/2020. SD/- SD/- (AMIT SHUKLA) (DR. B. R. R. KUMAR) JUDICIAL MEMBER ACCOUNT ANT MEMBER DATED: 14/05/2020 *SUBODH* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR