S.Padmalakshmi, Madurai V. DCIT, Madurai

ITA 1994/CHNY/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 77293 (ITAT-CHENNAI)
• Duration Of Justice: 6 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-05-2014
• Appeal Filed By: Assessee
• Bench Allotted: D
• Next Hearing Date: 27-03-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 13-11-2013
• Court: TRIBUNAL
• Assessee Lawyers: R SRINIVASAN SHRI ANIRU
• Keywords: Deemed dividend; Commercial expediency

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHE NNAI . . . , ! , ' # $ BEFORE DR. O.K. NARAYANAN, VICE PRESIDENT & SHRI VIKAS AWASTHY, JUDICIAL MEMBER . / I.T.A. NO. 1994/MDS/2013 / ASSESSMENT YEAR : 2009-10 S.PADMALAKSHMI, KESAR KUNJ, VINDHYACHAL APARTMENTS, 40, CHANDRAKANTHI NAGAR, BEHIND VAJRA BYE PASS ROAD, MADURAI-625 016 [PAN:AFVPP 1130 L] ( !% /APPELLANT) VS DY. COMMISSIONER OF INCOME TAX, CIRCLE-I(I), MADURAI ( &'!% /RESPONDENT) / APPELLANT BY : SHRI R. SRINIVASAN, ADVOCATE / RESPONDENT BY : SHRI ANIRUDH RAI, CIT-DR / DATE OF HEARING : 27-03-2014 ! / DATE OF PRONOUNCEMENT : 27-05-2014 #( / O R D E R PER VIKAS AWASTHY, J.M: THE APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST T HE ORDER OF COMMISSIONER OF INCOME TAX(APPEALS)-MADURAI, DAT ED 05-09-2013 RELEVANT TO THE ASSESSMENT YEAR (AY) 200 9-10. 2. IN APPEAL, THE ASSESSEE HAS RAISED TWO GROUNDS R ELATING TO ADDITION MADE U/S.2(22)(E) OF THE INCOME TAX ACT, 1 961 (HEREIN I.T.A. NO. 1994/MDS/2013 2 AFTER REFERRED TO AS THE ACT) AND DIS-ALLOWANCE O F DEDUCTION OF STAMP DUTY FROM THE COMPUTATION OF CAPITAL GAINS. THE BRIEF FACTS OF THE CASE ARE: THE ASSESSEE IS A DIRECTOR OF M/S.VISWAS PROMOTERS PRIVATE LIMITED. THE ASSESSEE FILED HER RETURN OF INCOME FOR THE AY.2009-10 ON 30-12-2009 D ECLARING HER INDIVIDUAL INCOME AS ` 9,86,430/-. THE CASE OF THE ASSESSEE WAS PROCESSED U/S.143(1) ON 05-08-2010 RESULTING IN REF UND OF ` 73,420/-. THE CASE OF THE ASSESSEE WAS SELECTED FO R SCRUTINY AND NOTICE U/S. 143(2) OF THE ACT WAS ISSUED TO THE ASS ESSEE ON 02-09- 2010. IN SCRUTINY ASSESSMENT PROCEEDINGS, THE ASSE SSING OFFICER DIS-ALLOWED A SUM OF ` 3,69,040/- CLAIMED BY THE ASSESSEE TOWARDS REGISTRATION EXPENSES OF LAND WHICH THE ASSESSEE HA D SOLD. THE ASSESSING OFFICER HELD THAT NORMALLY REGISTRATION E XPENSES ARE BORNE BY THE PURCHASER AND DIS-ALLOWED THE REGISTRA TION EXPENSES. THE ASSESSING OFFICER MADE ANOTHER DIS-ALLOWANCE U/ S.2(22)(E) OF THE ACT HOLDING THAT, THE ASSESSEE HAS TAKEN ADVANC E/LOAN FROM THE COMPANY TO THE TUNE OF ` 53,65,745/-. AGGRIEVED AGAINST THE ASSESSMENT ORDER DT.30-12-2 011, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(APPEALS ). THE CIT(APPEALS) VIDE IMPUGNED ORDER DT.05-09-2013, DIS MISSED THE APPEAL OF THE ASSESSEE ON BOTH THE GROUNDS. I.T.A. NO. 1994/MDS/2013 3 AGGRIEVED BY THE ORDER OF THE CIT(APPEALS), THE AS SESSEE HAS COME IN SECOND APPEAL BEFORE THE TRIBUNAL. 3. SHRI R.SRINIVASAN, APPEARING ON BEHALF OF THE AS SESSEE SUBMITTED THAT THE ASSESSEE IS A DIRECTOR OF A COMP ANY WHICH IS ENGAGED IN THE BUSINESS OF CONSTRUCTION AND SALE OF BUILDINGS. THE COMPANY INTENDED TO PURCHASE LAND MEASURING 28.50 A CRES IN VILANGUDI II BIT VILLAGE, MADURAI NORTH TALUK, MADU RAI DISTRICT. AS PER CIRCULAR DT.29-07-2004 FROM THE OFFICE OF TH E COMMISSIONER, TOWN & COUNTRY PLANNING, CHENNAI, POWERS WERE DELEG ATED TO THE REGIONAL DEPUTY DIRECTOR AND MEMBER SECRETARY OF TH E LOCAL PLANNING AUTHORITY TO GRANT APPROVALS OF LAYOUTS UP TO FIVE ACRES. THE COMPANY WANTED TO TAKE THE ADVANTAGE OF THE SAI D CIRCULAR. A RESOLUTION WAS PASSED IN THE MEETING OF BOARD OF DI RECTORS OF THE COMPANY ON 05-02-2008 AUTHORISING THE ASSESSEE TO P URCHASE LAND IN HER INDIVIDUAL NAME ON BEHALF OF THE COMPAN Y. THE LD.AR PLACED ON RECORD THE EXTRACTS OF THE MINUTES OF THE MEETING OF THE BOARD OF DIRECTORS HELD ON 20-11-2007 AND 05-02-200 8 TO SHOW THAT THE COMPANY INTENDED TO PURCHASE LAND MEASURIN G AROUND 28.50 ACRES AT VILANGUDI II BIT VILLAGE, MADURAI NO RTH TALUK, MADURAI DISTRICT FROM M/S.TRANSPARENT HEIGHTS REAL ESTATE LTD., CHENNAI AND AUTHORIZING THE ASSESSEE FOR REGISTRATI ON OF A LAND IN I.T.A. NO. 1994/MDS/2013 4 HER INDIVIDUAL NAME WITH AREA LESS THAN FIVE ACRES. THE EXTRACTS OF THE MINUTES OF THE BOARD MEETING ARE PLACED AT PAGE 5 AND 11 OF THE PAPER BOOK. A SALE DEED DT.06-02-2008 WAS ACCO RDINGLY EXECUTED IN THE NAME OF ASSESSEE IN RESPECT OF LAND MEASURING 3.88 ACRES SITUATED AT VILANGUDI II BIT VILLAGE, M ADURAI NORTH TALUK, MADURAI DISTRICT. THE LD.AR SUBMITTED THAT THE MONEY WAS ADVANCED BY THE COMPANY TO THE ASSESSEE FOR PURCHAS E OF LAND ON BEHALF OF THE COMPANY AND NOT FOR HER INDIVIDUAL BE NEFIT, THEREFORE, THE PROVISIONS OF SECTION 2(22)(E) ARE NOT ATTRACTE D. IN ORDER TO SUPPORT HIS CONTENTIONS, THE LD.COUNSEL RELIED ON T HE DECISION OF THE CO-ORDINATE BENCH OF THE TRIBUNAL IN THE CASE O F ACIT VS. HARSHAD. V. DOSHI REPORTED AS 130 ITD 137: 136 TTJ, (CHENNAI) 351. AS REGARDS THE SECOND ISSUE, THE LD.COUNSEL SUBMITT ED THAT THE ASSESSEE HAS TRANSFERRED LAND TO THE COMPANY AN D IT WAS MUTUALLY AGREED BETWEEN THE PARTIES THAT THE REGIST RATION EXPENSES SHALL BE BORNE BY THE PURCHASER. IN SUPPORT OF HIS CONTENTIONS, THE COUNSEL FOR THE ASSESSEE PLACED ON RECORD A COPY OF SALE AGREEMENT DT.10-02-2008. 4. ON THE OTHER HAND, SHRI ANIRUDH RAI, APPEARING O N BEHALF OF THE REVENUE SUBMITTED THAT THE AMOUNTS DEBITED IN T HE ACCOUNT OF I.T.A. NO. 1994/MDS/2013 5 THE ASSESSEE ARE NOT RELATED WITH THE PROPERTY TRAN SACTION AS CONTENDED BY THE COUNSEL FOR THE ASSESSEE. THERE W AS OPENING DEBIT BALANCE OF ` 3.28 CRORES AS ON 01-04-2008 AND DURING THE YEAR, ANOTHER SUM OF ` 53,65,745/- WAS ADDED TO IT. ON THE SECOND GROUND RAISED IN THE APPEAL, THE LD.DR SUBMITTED TH AT IN THE NORMAL PRACTICE, IT IS THE VENDEE WHO BEARS THE COST OF TH E REGISTRATION EXPENSES AND NOT A VENDOR. THE LD.DR VEHEMENTLY SU PPORTED THE IMPUGNED ORDER AND PRAYED FOR THE DISMISSAL OF THE APPEAL OF THE ASSESSEE. 5. WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESENTATIVES OF BOTH THE SIDES AND HAVE PERUSED THE ORDERS OF THE AUTHORITIES BELOW. WE HAVE ALSO EXAMINED THE D ECISION ON WHICH THE LD.COUNSEL FOR THE ASSESSEE HAS PLACED RE LIANCE. IT IS A WELL SETTLED LAW THAT WHERE AMOUNT HAS BEEN ADVANCE D TO THE DIRECTOR (HAVING NOT LESS THAN 10% OF THE VOTING PO WER) BY A COMPANY IN WHICH THE PUBLIC IS NOT SUBSTANTIALLY IN TERESTED, THE PROVISIONS OF SECTION 2(22)(E) SHALL COME INTO PLAY . THE OTHER CONDITIONS TO BE SATISFIED ARE THAT THE ADVANCE IS NOT MADE IN THE ORDINARY COURSE OF BUSINESS OF THE COMPANY AND THE COMPANY IS HAVING ACCUMULATED PROFITS TO THAT EXTENT. I.T.A. NO. 1994/MDS/2013 6 6. IN THE PRESENT CASE, IT IS AN UNDISPUTED FACT TH AT THE AMOUNT HAS BEEN ADVANCED BY THE COMPANY. HOWEVER, THE CON TENTION OF THE ASSESSEE IS THAT THE SAID AMOUNT IS UTILIZED FO R PURCHASE OF LAND FOR THE COMPANY AND NOT FOR THE PERSONAL USE O F THE ASSESSEE. WE HAVE TO SEE WHETHER THE AMOUNT HAS BEEN ADVANCED TO THE ASSESSEE FOR HER PERSONAL USE OR FOR THE BENEFIT OF THE COMPANY? THE LD.COUNSEL FOR THE ASSESSEE HAS PLACED ON RECOR D THE EXTRACTS OF THE MINUTES OF THE MEETING OF THE BOARD OF DIREC TORS DT.20-11- 2007, WHEREIN, THE COMPANY INTENDED TO PURCHASE LA ND MEASURING 28.50 ACRES. THEREAFTER, ON 05-02-2008 IN ANOTHER MEETING OF THE BOARD OF DIRECTORS IT WAS RESOLVED TO PURCHASE LAND HAVING AREA LESS THAN FIVE ACRES IN THE NAME OF INDIVIDUAL DIRE CTORS FOR AND ON BEHALF OF THE COMPANY. THE RESOLUTION WAS ALLEGEDL Y PASSED TO TAKE THE ADVANTAGE OF CIRCULAR DT.29-07-2004 FROM T HE OFFICE OF THE COMMISSIONER OF TOWN AND COUNTRY PLANNING, CHENNAI WHEREIN THE POWERS WERE DELEGATED FOR APPROVAL OF LAY OUTS UPTO FIVE ACRES TO THE REGIONAL DEPUTY DIRECTOR AND MEMBER SECRETAR Y OF LOCAL PLANNING AUTHORITY. ON 06-02-2008, LAND MEASURING 3.88 ACRES WAS PURCHASED IN THE NAME OF THE ASSESSEE FOR A CON SIDERATION OF ` 2,51,26,184/- FROM M/S.TRANSPARENT HEIGHTS REAL EST ATE LTD., CHENNAI . THE SEQUENCE OF EVENTS SHOW THAT THE LAND WAS ALLEGEDLY PURCHASED FOR AND ON BEHALF OF THE COMPAN Y IN THE NAME I.T.A. NO. 1994/MDS/2013 7 OF INDIVIDUAL ASSESSEE WHO IS THE DIRECTOR OF THE S AID COMPANY. A PERUSAL OF THE IMPUGNED ORDER SHOWS THAT REMAND R EPORT WAS SOUGHT FROM THE ASSESSING OFFICER. THE CIT(APPEALS ) AFTER EXAMINING THE REPORT APPROVED THE FINDINGS OF ASSES SING OFFICER THAT THE AMOUNT DEBITED DURING THE YEAR IS A LOAN A DVANCED BY THE COMPANY AND HENCE IS DEEMED DIVIDEND IN THE HANDS O F THE ASSESSEE. HOWEVER, THERE IS NO FINDING WHETHER THE AMOUNT ADVANCED TO THE ASSESSEE WAS UTILIZED BY THE ASSESS EE FOR HER PERSONAL GAINS OR FOR THE PURCHASE OF LAND FOR AND ON BEHALF OF THE COMPANY. CERTAINLY, THE PROVISIONS OF SECTION 2(22 )(E) WILL COME INTO PLAY IF THE AMOUNT ADVANCED IS UTILIZED BY THE ASSESSEE FOR HER PERSONAL USE AND GAINS. THE CONTENTION OF THE ASSE SSEE THAT THE AMOUNT IS UTILIZED FOR THE PURCHASE OF LAND FOR AND ON BEHALF OF THE COMPANY REMAINED UNREBUTTED. THUS, THE SAID AMOUNT CANNOT BE TREATED AS DEEMED DIVIDEND IN THE HANDS OF THE ASSE SSEE. 7. THE LD.COUNSEL FOR THE ASSESSEE HAS DRAWN SUPPOR T FROM THE DECISION OF THE CO-ORDINATE BENCH OF THE TRIBUNAL I N THE CASE OF ACIT VS. HARSHAD. V. DOSHI (SUPRA). WE FIND THAT IN THE SAID CASE, THERE WAS SIMILAR SITUATION, WHERE THE ASSESSEE WAS AUTHORIZED BY THE BOARD RESOLUTION TO PURCHASE LAND IN ITS INDIVI DUAL NAME FOR AND ON BEHALF OF THE COMPANY. THE DEPARTMENT MADE ADDI TION I.T.A. NO. 1994/MDS/2013 8 U/S.2(22)(E) OF THE ACT. THE TRIBUNAL HAD HELD THA T THE ADVANCES GIVEN BY THE COMPANY TO ITS DIRECTORS WAS PURELY ON ACCOUNT OF COMMERCIAL EXPEDIENCY AND THUS OUTSIDE THE PURVIEW OF SECTION 2(22)(E). THE RESOLUTION WAS PASSED BY THE COMPAN Y AUTHORIZING THE ASSESSEE TO PURCHASE THE LAND IN RESPECT OF VAR IOUS PROPERTIES ON WHICH DEVELOPMENT WAS PROPOSED BY THE COMPANY. THE TRANSACTIONS WERE PURELY MADE FOR BUSINESS EXPEDIEN CY. IN THE PRESENT CASE, WE FIND THAT THE DECISION TO PURCHASE LAND MEASURING LESS THAN FIVE ACRES IN THE NAME OF DIRECTORS OF THE COMPANY WAS PURELY OUT OF BUSINESS CONSIDERATIONS. AS OBSERVED EARLIER, THE REVENUE HAS NOT PROBED FROM THE ANGLE WHETHER THE SUM ADVANCED IS UTILIZED BY THE ASSESSEE FOR HER PE RSONAL GAINS OR FOR THE PURCHASE OF LAND FOR AND ON BEHALF OF THE C OMPANY IN WHICH SHE IS DIRECTOR. THE ISSUE IS REMITTED BACK TO THE ASSESSING OFFICER TO EXAMINE THE SAME FROM THIS ANGLE AND THE REAFTER, PASS ORDERS IN ACCORDANCE WITH LAW. 8. THE SECOND ISSUE RAISED IN THE APPEAL IS WITH RE GARD TO EXPENDITURE CLAIMED BY THE ASSESSEE ON STAMP DUTY W HILE COMPUTING CAPITAL GAINS. IN THE IMPUGNED ORDER, TH E CIT(APPEALS) HAS CONFIRMED THE ADDITION MADE BY THE ASSESSING OF FICER ON THE GROUND OF GENERAL PRACTICE IN REGISTRATION OF THE S ALE DEEDS. THE I.T.A. NO. 1994/MDS/2013 9 LD.COUNSEL HAS PLACED ON RECORD A COPY OF SALE AGRE EMENT DT.10-02-2002 BETWEEN THE ASSESSEE AND M/S.VISWAS P ROMOTERS PRIVATE LIMITED. A PERUSAL OF CLAUSE-3 OF SAME SHO WS THAT STAMP DUTY AND REGISTRATION EXPENSES TO BE INCURRED FOR T RANSFER OF HOUSE SITES IS TO BE BORNE EQUALLY BETWEEN THE PARTIES TO THE AGREEMENT. IN VIEW OF SPECIFIC CLAUSE IN THE AGREEMENT, THE EX PENSES ON STAMP DUTY AND REGISTRATION ARE TO BE DIVIDED EQUAL LY BETWEEN THE ASSESSEE AND THE COMPANY. THUS, ONE HALF OF SUCH EX PENDITURE HAS TO BE ALLOWED. 9. IN VIEW OF THE ABOVE, THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON TUESDAY, THE 27 TH MAY, 2014 AT CHENNAI. SD/- SD/- ( . . . ) ( ! ) (DR. O.K. NARAYANAN) (VIKAS AWAS THY) '#$ / VICE PRESIDENT % &' / JUDICIAL MEMBER (% /CHENNAI, )& /DATED: 27 TH MAY, 2014 TNMM &* +,-, /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. ./0 /CIT(A) 4. . /CIT 5. ,12 3 /DR 6. 245 /GF