ITO 19(3)(4), MUMBAI V. VIKRAMDITYA KUKREJA, MUMBAI

ITA 1189/MUM/2013

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 2468 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 9 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-11-2015
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 11-03-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 11-02-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: VISHWAS JADHAV
• Keywords: Deemed dividend

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUMBAI BEFORE S/SHRI B.R.BASKARAN, AM AND PAWAN SINGH, JM ./ I.T.A. NO . 1189 / MUM/20 1 3 ( / ASSESSMENT YEA R : 200 7 - 2008 ) INCOME TAX OFFIC ER - 1 9 (3) (4), PIRAMAL CHAMBER, ROOM NO.304, LALBAUG, MUMBAI - 400012 / VS. SHRI VIKRAMADITYA KUKREJA, 1001, 11 TH F LOOR , 29 SEA , WORLD, PERRY CROSS ROAD, BANDRA (W), MUMBAI - 4000 50 ( / APPELLANT ) .. ( / RESPONDENT ) ./ ./PAN. : AJFPK8837P / REVENUE BY SHRI VISHWAS JADHAV / ASSESSEE BY SHRI NARESH KUMAR / DATE OF HEARING : 5 .11 . 201 5 / DATE OF PRONOU NCEMENT: 18 .11. 201 5 / O R D E R P ER B R BASKARAN, AM : THE REVENUE HAS FILED THIS APPEAL CHALLENGING THE ORDER DATED 07 - 11 - 2012 PASSED BY LD CIT(A) - 30, MUMBAI AND IT RELATES TO THE ASSESSMENT YEAR 2007 - 08. THE REVENUE IS ASSAILING THE DE CISION OF LD CIT(A) IN CANCELLING THE ASSESSMENT OF RS.1 3 . 36 LAKHS MADE U/S 2(22)(E) OF THE ACT. 2. THE ASSESSEE IS A SHAREHOLDER HAVING SUBSTANTIAL INTEREST IN A COMPANY NAMED M/S KUKREJA BUILDERS PVT LTD (HEREINAFTER COMPANY) . THE AO NOTICED THAT T HE ASSESSEE HAS AVAILED A LOAN OF RS.18.00 LAKHS FROM THAT COMPANY AND HENCE THE AO EXAMINED THE SAME IN TERMS OF THE PROVISIONS OF SEC. 2(22)(E) OF THE ACT. THE ASSESSEE SUBMITTED THAT THE ABOVE SAID COMPANY ORIGINALLY ENTERED INTO AN AGREEMENT WITH TWO ITA NO. 1189 / MUM/20 1 3 2 PERSONS FOR PURCHASING AN AGRICULTURAL LAND AND THE ABOVE SAID SUM OF RS.18.00 LAKHS WAS PAID IN THAT CONNECTION . THE ASSESSEE SUBMITTED THAT THE COMPANY HAD INTENDED TO CONVERT THE LAND INTO NON AGRICULTURAL LAND AND THEN DEVELOP A CONSTRUCTION PROJECT. LATER I T CAME TO THE NOTICE OF THE COMPANY THAT ONLY AGRICULTURISTS CAN PURCHASE THE AGRICULTURAL LAND AND A LIMITED COMPANY CANNOT PURCHASE AGRICULTURAL LAND. ACCORDINGLY A SUPPLEMENTARY AGREEMENT WAS ENTERED INTO, BY VIRTUE OF WHICH THE NAME OF THE ASS ESSEE AND HIS BROTHER SHRI MANISH KUKREJA WAS SUBSTITUTED IN THE PLACE OF THE COMPANY . IT WAS FURTHER SUBMITTED THAT THE ENTRY RELATING TO PURCHASE OF LAND AND LOAN RECEIPT FROM THE COMPANY HAVE BEEN PASSED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE BY WAY O F JOURNAL ENTRY. ACCORDINGLY, IT WAS CONTENDED THAT THE AMOUNT OF RS.18.00 LAKHS SHOWN AS LOAN RECEIVED FROM THE COMPANY HAS BEEN USED FOR PURCHASE OF LAND ON BEHALF OF THE COMPANY AND HENCE THE SAME CANNOT BE TAKEN AS PERSONAL LOAN ATTRACTING THE PROVISI ONS OF SEC. 2(22)(E) OF THE ACT. 3. THE ASSESSING OFFICER WAS NOT CONVINCED WITH THE EXPLANATIONS OF THE ASSESSEE. SINCE M/S KUKREJA BUILDERS PVT LTD WAS NOT CARRYING ON MONEY LENDING BUSINESS, THE AO HELD THAT THE PAYMENT OF RS.18.00 LAKHS TO THE AS SESSEE CANNOT BE CONSIDERED TO BE THE PAYMENT MADE IN THE ORDINARY COURSE OF BUSINESS. HE FURTHER SUBMITTED THAT THE ASSESSEE DID NOT FURNISH ANY RECORD TO SHOW THAT THE STEPS WERE TAKEN EITHER BY THE ASSESSEE OR BY THE COMPANY TO CONVERT THE LAND INTO NO N - AGRICULTURAL AND TO DEVELOP THE PROJECT. ACCORDINGLY, THE AO HELD THAT THE PROVISIONS OF SEC. 2(22)(E) ARE ATTRACTED IN THIS CASE. SINCE THE ACCUMULATED PROFITS OF THE COMPANY STOOD AT RS.13,36,884/ - AND SINCE THE SAME WAS LESS THAN THE LOAN AMOUNT, TH E AO ASSESSED THE AMOUNT OF RS.13,36,884/ - AS DEEMED DIVIDEND IN THE HANDS OF THE ASSESSEE. 4. THE LD. CIT(A), HOWEVER, WAS CONVINCED WITH THE EXPLANATION OF THE ASSESSEE AND ACCORDINGLY HELD THAT THE ADVANCES OF RS.18 LAKHS WAS GIVEN ITA NO. 1189 / MUM/20 1 3 3 BY THE COMPANY TO THE ASSESSEE ON COMMERCIAL CONSIDERATION S AND HENCE THE SAME DOES NOT FALL UNDER THE PURVIEW OF SECTION 2(22)(E) OF THE ACT. ACCORDINGLY HE DELETED THE ADDITION MADE BY THE AO. AGGRIEVED BY THE DECISION OF THE LD.CIT(A), THE REVENUE HAS FILED THIS APPEAL BEFORE US. 5. THE LD. DR SUBMITTED THAT THE EXPLANATION OF THE ASSESSEE THAT THE LAND WAS INTENDED TO BE PURCHASED FOR EXECUTION OF PROJECT OF COMPANY CITED ABOVE HAS NOT BEEN PROVED BY ANY DOCUMENTARY EVIDENCE. HE FURTHER SUBMITTED THAT THE ASSESSEE HA S NOT TAKEN ANY STEP SO FAR TO CONVERT THE LAND INTO TO NON - AGRICULTURAL LAND AND FURTHER TILL DATE THE ASSESSEE CONTINUOUSLY OWNS THE LAND. ACCORDINGLY, THE LD. DR SUBMITTED THAT THE LD.CIT(A) WAS NOT JUSTIFIED IN ACCEPTING THE EXPLANATION S OF THE ASSESS EE ON THE FACE OF IT WITHOUT ANY DOCUMENTARY EVIDENCE . ACCORDINGLY, THE LD. DR SUBMITTED THAT THE LOAN / ADVANCE RECEIVED BY THE ASS ESSEE CANNOT BE CONSIDERED TO BE FOR BUSINESS CONSIDERATION AND HENCE THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT SHALL S QUARELY APPLY TO THIS TRANSACTION. 6. ON THE CONTRARY, THE LD.AR SUBMITTED THAT THE COMPANY M/S KUKERAJA BUILDERS PVT.LTD IS IN THE BUSINESS OF CONSTRUCTION AND HENCE IT ORIGINALLY ENTERED INTO AN AGREEMENT FOR PURCHASE OF LAND FOR THE PURPOSE OF ITS BUSI NESS. SINCE THE SAID LAND HAD BEEN CLASSIFIED AS AGRICULTURAL LAND AND SINCE THE AGRICULTURAL LAND CAN BE PURCHASED ONLY BY AGRICULTURIST S IN THE STATE OF MAHARASHTRA, THE COMPANY WAS CONSTRAINED TO PURCHASE THE LAND IN THE NAME OF ONE OF ITS DIRECTORS. A CCORDINGLY, THE LD. AR SUBMITTED THAT THE LOAN AMOUNT OF RS.18 LAKHS SHOWN IN THE BOOKS OF THE ASSESSEE ACTUALLY REPRESENT COST OF LAND WHICH IS GOING TO BE USED BY THE COMPANY CITED ABOVE. ACCORDINGLY, HE SUBMITTED THAT T HE ASSESSEE HAS BEEN GIVEN LOAN AS WELL AS LAND IN CONNECTION WITH THE BUSINESS OF THE COMPANY AND HENCE THE PROVISIONS OF SECTION 2(22)(E) SHALL NOT APPLY. THE LD. AR IN SUPPORT OF HIS CONTENTION PLACED RELIANCE ON THE FOLLOWING CASE LAWS: A ) CIT V/S NAGINDAS M KAPADIA - (1989) 177 ITR 03 93; ITA NO. 1189 / MUM/20 1 3 4 B ) ACIT V/S HARSHAD V DOSHI - (2011) 130 ITD 0137; AND C ) PRADIP KUMAR MALHOTRA V/S CIT - (2011) 338 ITR 0538 THE LD. AR SUBMITTED THAT THE ABOVE SAID THREE DECISIONS SHALL SQUARELY APPLY TO THE FACTS OF THE PRESENT CASE AND ACCORDINGLY PRAYED THAT THE ORDER O F LD. CIT(A) BE UPHELD. 7 . WE HAVE HEARD THE PARTIES AND CAREFULLY PERU SED THE RECORD. WE HAVE NOTICED THAT THE LD CIT(A) HAS GIVEN RELIEF TO THE ASSESSEE ON THE GROUND T HAT THE LOAN OF RS.18 LAKHS AS WELL AS THE CORRESPONDING LAND WAS TRANSFERRED TO THE NAME OF THE ASSESSEE ON COMMERCIAL CONSIDERATION , I.E. COMPANY WAS CONSTRAINED TO PURCHASE LAND IN THE NAME OF ASSESSEE ON ACCOUNT OF SPECIAL LAWS EXISTING IN THE STATE OF MAHARASHTRA. HOWEVER, IT IS PERTINENT TO NOTE THAT THE ABOVE SAID EXPLANATION OF THE ASSESSEE HAS NOT BEEN SUBSTANTIATED WITH ANY TYPE OF DOCUMENTARY EVIDENCE EITHER BEFORE THE AO OR BEFORE LD CIT(A) . EVEN BEFORE US, NO MATERIAL WAS PLACED BY THE ASSESSEE TO SUBSTANTIATE THE ABOVE SAID EXPLANATION. WE NOTICE THAT THE LAND WAS PURCHAS E D WAY BACK IN THE YEAR 2006 . WHEN IT WAS SPECIFICALLY ASKED ABOUT THE PRESENT STATUS OF THE LAND , THE LD. AR FAIRLY ADMITTED TH AT THE LAND STILL REMAINS AS AGRICULTURAL LAND ONLY . THOUGH IT IS STATED THAT THE ASSESSEE AND THE COMPANY ARE TAKING STEPS TO CONVERT THE SAME INTO NON - AGRICULTURAL LAND, YET NO DOCUMENT WHATSOEVER WAS FURNISHED TO SUBSTANTIATE THE EXPLANATION . HENCE, WE FIND MERIT IN THE CONTENTION OF LD. DR THAT THE EXPLANATION S FURNISHED BY THE ASSESSEE W ERE NOT SUBSTANTIATED AND HENCE IT IS NOT POSSIBLE TO ACCEPT THE SAME ON THE FACE OF IT. FURTHER, WE NOTICE THAT THE AMOUNT OF RS.18.00 LAKHS WAS CLAIMED TO HAVE BEEN PAID BY THE COMPANY, WHEN THE ORIGINAL MOU WAS ENTERED INTO. LATER A SUPPLEMENTARY DEED WAS PREPARED, WHEREBY THE ASSESSEE AND HIS BROTHERS NAME WERE SUBSTITUTED. EVEN THOUGH SUCH KIND OF EXPLANATIONS WAS GIVEN, YET NO DETAILS AS TO THE COST OF LAND, STAMP DUTY EXPENSES, REGISTRATION EXPENSES WERE FURNISHED. IT IS ALSO NOT STATED AS TO ITA NO. 1189 / MUM/20 1 3 5 WHAT WAS THE FINAL COST OF THE LAND AN D HOW IT WAS ACCOUNTED IN THE BOOKS OF THE COMPANY, ASSESSEE AND ASSESSEES BROTHER . FURTHER, EVEN THOUGH IT IS CLAIMED THAT THE ASSESSEE HAS HELD THE LAND ON BEHALF OF THE COMPANY, YET IT WAS NOT SHOWN AS TO HOW THE COMPANY RETAINED ITS LIEN OVER THE LAN D. HENCE, IN OUR VIEW, THE EXPLANATIONS FURNISHED BY THE ASSESS EE ARE OBSCURE AND SELF SERVING ONE. 9. WE HAVE GONE THROUGH THE CASE LAW S RELIED UPON BY THE ASSESSEE . I N THE CASE OF NAGINDAS M KAPADIA (SUPRA), THERE WAS A SPECIFIC FINDING THAT THE ASSE SSEE THEREIN RECEIVED ADVANCES FROM THE COMPANY IN RESPECT OF THE PURCHASE S MADE BY THE COMPANY FROM THE ASSESSEE. IN THE INSTANT CASE, WE HAVE NOTICED THAT THE ASSESSEE COULD NOT SUBSTANTIATE THE EXPLANATION AND HENCE THIS DECISION CANNOT BE RELIED UPON B Y THE ASSESSEE. 10. IN THE CASE OF HARSHAD V DOSHI (SUPRA) , THE ASSESSEE THEREIN PURCHASED LAND WHICH WAS TO BE DEVELOPED BY THE COMPANY AND THE PURPOSE OF PURCHASE OF LAND IN THE NAME OF DIRECTOR WAS TO BIFURCATE OWNERSHIP OF LAND AND DEVELOPMENT OR CONS TRUCTION OF FLATS THEREON SO AS TO REDUCE THE INCIDENCE OF STAMP DUTY AND ULTIMATE CUSTOMERS. HENCE, THE OBJECT WAS CLEAR AT THE TIME OF PURCHASE ITSELF AND FURTHER THE TRIBUNAL HAS NOTICED THAT CONSTRUCTION OF PROJECTS WAS IMMEDIATELY UNDERTAKEN AND HENC E THERE WAS BUSINESS CONSIDERATION IN ARRANGING THE AFFAIRS OF THE COMPANY. UNDER THESE SET OF FACTS, THE TRIBUNAL TOOK THE VIEW THAT THE TRANSACTION WAS MOTIVATED BY BUSINESS CONSIDER ATION. IN THE INSTANT CASE, THE ASSESSEE HAS NOT SHOWN THAT EITHER HE OR THE COMPANY HAS TAKEN STEPS TO CONVERT THE LAND INTO NON - AGRICULTURAL LAND AND TO START PROJECT , EVEN AFTER EXPIRY OF ABOUT 8 YEARS . HENCE, IN OUR VIEW , THE ASSESSEE CANNOT PLACE RELIANCE ON THIS DECISION ALSO. ITA NO. 1189 / MUM/20 1 3 6 11. IN PRADIP KUMAR MALHOTRA (SUPRA) , TH E ASSESSEE THEREIN HAD PERMITTED THE COMPANY TO MORTGAGE HIS PROPERTY IN ORDER TO ENABLE THE COMPANY TO SECURE BANK LOAN. LATER ON, WHEN THE ASSESSEE WAS IN URGENT NEED OF MONEY, HE REQUESTED THE COMPANY EITHER TO GET PROPERTY RELEASE D OR PURCHASE THE SAM E. SINCE THE COMPANY WAS UN ABLE TO DO EITHER OF THE TWO, IT ADVANCED MONEY TO THE SHAREHOLDER. UNDER THESE SET OF FACTS, THE TRIBUNAL HELD THAT THE ADVANCE SO RECEIVED BY THE ASSESSEE DID NOT AMOUNT TO DIVIDEND WITHIN THE MEANING OF SECTION 2(22)(E) OF THE ACT. THE FACTS PREVAILING IN THE ABOVE SAID CASE LAW ARE TOTALLY DIFFERENT AND HENCE CANNOT BE PLACED RELIANCE ON THIS DECISION ALSO. 12. IN VIEW OF THE ABOVE DISCUSSION, WE DO NOT FIND ANY MERIT IN THE ORDER OF LD. CIT(A). ACCORDINGLY, WE SET ASIDE THE ORDER OF THE LD. CIT(A) AND RESTORE THE ORDER PASSED BY THE AO. 13 . IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS ALLOWED. PRONOUNCED ACCORDINGLY ON 18TH NOVEMBER , 2 015. 18TH NOV , 2 015 SD SD ( PAWAN SINGH ) ( B.R. BASKARAN) JUDICIAL MEMBER ACCOUNTAN T MEMBER MUMBAI: 18TH NOV , 2 015. . . ./ SRL , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - CONCERNED 4. / CIT CONCERNED 5. , , / DR, ITAT, MUMBAI CONCERNED 6. / GUARD FILE. / BY ORDER, TRUE COPY (ASSTT. REGISTRAR) , /ITAT, MUMBAI