ACIT, New Delhi V. M/s Today Hotels (Andhra) Pvt. Ltd., New Delhi

ITA 2814/DEL/2017

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 2657 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 9 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-02-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2012-2013
• Appeal Filed On: 05-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRAKASH DUBEY
• Keywords: Deemed dividend
• Section: 2(22)(e)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G, NEW DELHI BEFORE MS. SUCHITRA KAMBLE, JUDICIAL MEMBER DR. B. R. R. KUMAR, ACCOUNTANT MEMBER (THROUGH VIDEO CONFERENCING) ITA NO. 2814/DEL/2017 : ASSTT. YEAR : 2012-13 ASSTT. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-31, NEW DELHI VS M/S TODAY HOTELS(ANDHRA) PVT. LTD., 16 TH FLOOR, STATESMAN HOUSE, BARAKHAMBA ROAD, NEW DELHI-110001 (APPELLANT) (RESPONDENT) PAN NO. A A CCT4697D ASSESSEE BY : NONE REVENUE BY : SH. PRAKASH DUBEY, SR. DR DATE OF HEARING: 16.02.2021 DATE OF PRONOUNCEMENT: 22.02.2021 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)-13, NEW DELHI DATED 03. 11.2016. 2. THE MOOT ISSUE PERTAINS TO THE OBJECTION TO THE ADDITION OF RS.7,50,22,872/- U/S 2(22)(E) OF THE INCOME TAX ACT , 1961. 3. THE UNDISPUTED FACTS ARE, THAT THERE IS CROSS HOLDING OF SHARES BETWEEN THE APPELLANT AND M/S THIPL. THAT THE ASSESSEE IS THE BENEFICIAL HOLDER OF SHARE S IN M/S. THIPL, HAVING SUBSTANTIAL INTEREST, AND M/S. T HIPL HAS ACCUMULATED PROFITS AS ON 31.03.2012. ITA NO. 2814/DEL/2017 TODAY HOTELS (ANDHRA) PVT. LTD. 2 THAT THE SUM OF RS.7,50,22,872/- RECEIVED FROM M/S THIPL TO FULFILL THE TRANSACTION OF SALE OF FSI FOR RS.95,00,00,000/- TO THIPL, AS PER AGREEMENT BETWEE N THEM. THE ACQUIRED, THROUGH AUCTION BY HYDERABAD URBAN DEVELOPMENT AUTHORITY (HUDA) ON 20.07.2006, A PLOT OF 4.608 ACRES AT KOKAPET VILLAGE, HYDERABAD. THE SALE PRICE TO BE PAID WAS RS.62,25,40,800/-. THE POSSESSION OF THE PLOT WAS ALSO HANDED OVER ON 26.03.2008. THE ASSESSEE INTENDED TO USE THE LAND F OR DEVELOPMENT OF A COMMERCIAL BUILDING INCLUDING A MULTIPLEX. THE ASSESSEE OBTAINED A TERM LOAN OF RS.25,00,00,000/- FROM HUDCO ON 18.01.2007, OF WHIC H RS.20,75,00,000/- WAS DISBURSED TO HUDA ON 26.03.20 08. THUS IT IS PROVED THAT THE ASSESSEE HAS OBTAINED A RIGHT OVER THE PROPERTY BUT DID NOT HAVE ADEQUATE FUNDS TO PAY THE AGREED UPON PRICE TO HUDA, AND TO COMPLETE THE CONSTRUCTION PROJECT, ENTERED INTO AN AGREEMENT WIT H M/S THIPL ON 30.07.2010 FOR SALE OF THE FSI OF THE PLOT IN QUESTION FOR THE CONSIDERATION OF RS.95,00,00,000/- , AND BY ADDENDUM DATED 02.08.2010, M/S THIPL WAS ALSO TO REPAY THE LOAN OUTSTANDING OF RS.19,18,00,000/- AS ON 13.07.2010. DURING THE F.Y. 2011-12, M/S. THIPL PAID THE SUM OF RS.7,50,22,872/- TO THE ASSESSEE, WHICH WAS UTILIZE D TO PAY THE LOAN INSTALLMENTS TO HDFC. THE TERM LOAN BALANCE AS ON 31.03.2012 STANDS REDUC ED TO RS.11,73,58,193/-. THE ASSESSEE HAS FILED COPIES OF THE LEDGER ACCOUNTS OF M/S THIPL, HUDCO AND HDFC. THE ASSESSEE HAS FILED COPIES OF THE ALLOTMENT LETTER O F THE ITA NO. 2814/DEL/2017 TODAY HOTELS (ANDHRA) PVT. LTD. 3 PLOT BY HUDA, SANCTION LETTER OF LOAN FROM HUDCO AN D HDFC, AND AGREEMENTS SIGNED WITH M/S THIPL. THE ASSESSEE HAS ARGUED BEFORE THE REVENUE THAT THE FUNDS WERE DISBURSED BY M/S THIPL AS PART OF A COMMERCIAL TRANSACTION OF SALE OF FSI, AND NOT AS A LOAN. THE ASSESSEE HAS RELIED BEFORE THE LD. CIT (A) ON T HE JUDGMENT OF THE HIGH COURT OF DELHI IN THE CASE OF CIT VS. RAJ KUMAR (2009) 318 ITR 181, WHEREIN IS WAS HELD T HAT 'KEEPING THE AFORESAID RULE IN MIND, THE WORD 'ADVA NCE', WHICH APPEARS IN THE COMPANY OF THE WORD 'LOAN', CA N ONLY MEAN SUCH ADVANCE WHICH CARRIES WITH IT AN OBLIGATI ON OF REPAYMENT TRADE ADVANCE, WHICH IS IN THE NATURE OF MONEY TRANSACTED TO GIVE EFFECT TO A COMMERCIAL TRANSACTION, WOULD NOT FALL WITHIN THE AMBIT OF THE PROVISION OF SECTION 2(22)(E).' RELIANCE WAS ALSO PLACED ON THE JUDGMENT OF THE HIG H COURT OF DELHI IN THE CASE OF CIT VS. AMBASSADOR TR AVELS PVT. LTD., WHERE THE COURT HAS HELD THAT 'SINCE THE TRANSACTIONS WERE NORMAL BUSINESS TRANSACTIONS, WHI CH WERE CARRIED OUT DURING THE COURSE OF THE RELEVANT PREVIOUS YEAR, THEY CANNOT BE DESCRIBED AS ADVANCES OR LOANS, WHICH FORM A DISTINCT CATEGORY OF FINANCIAL TRANSACTIONS.' THE LD.DR RELIED ON THE ORDER OF THE ASSESSING OFFI CER AND THE BARE PROVISIONS OF THE ACT REGARDING THE SECTIO N 2(22)(E). ITA NO. 2814/DEL/2017 TODAY HOTELS (ANDHRA) PVT. LTD. 4 4. WE HAVE PERUSED THE MATERIAL AVAILABLE ON RECORD . WE ARE AWARE OF THE CIRCULAR OF THE CBDT BELOW W.R.T THE S ECTION 2(22)(E) WHICH IS AS UNDER : CIRCULAR NO. 19/2017 F. NO. 279/MISC./140/2015/ITJ GOVERNMENT OF INDIA MINISTRY OF FINANCE CENTRAL BOARD OF DIRECT TAXES NEW DELHI, DATED 12TH JUNE, 2017 SUB: SETTLED VIEW ON SECTION 2(22)(E) OF THE INCOME TAX ACT, TRADE ADVANCES -REG. SECTION 2(22) CLAUSE (E) OF THE INCOME TAX ACT, 196 1 (THE ACT) PROVIDES THAT DIVIDEND INCLUDES ANY PAYMENT BY A COMPANY, NOT BEING A COMPANY IN WHICH THE PUBLIC ARE SUBSTANTIAL LY INTERESTED, OF ANY SUM BY WAY OF ADVANCE OR LOAN TO A SHAREHOLDER, BEING A PERSON WHO IS THE BENEFICIAL OWNER OF SHARES (NOT BEING SH ARES ENTITLED TO A FIXED RATE OF DIVIDEND WHETHER WITH OR WITHOUT A RI GHT TO PARTICIPATE IN PROFITS HOLDING NOT LESS THAN TEN PER CENT OF TH E VOTING POWER, OR TO ANY CONCERN IN WHICH SUCH SHAREHOLDER IS A MEMBE R OR A PARTNER AND IN WHICH HE HAS A SUBSTANTIAL INTEREST (HEREAFT ER IN THIS CLAUSE REFERRED TO AS THE SAID CONCERN) OR ANY PAYMENT BY ANY SUCH COMPANY ON BEHALF, OR FOR THE INDIVIDUAL BENEFIT, O F ANY SUCH SHAREHOLDER, TO THE EXTENT TO WHICH THE COMPANY IN EITHER CASE POSSESSES ACCUMULATED PROFITS. 2. THE BOARD HAS OBSERVED THAT SOME COURTS IN THE R ECENT PAST HAVE HELD THAT TRADE ADVANCES IN THE NATURE OF COMMERCIA L TRANSACTIONS WOULD NOT FALL WITHIN THE AMBIT OF THE PROVISIONS O F SECTION 2(22) (E) OF THE SUCH VIEWS HAVE ATTAINED FINALITY. 2.1 SOME ILLUSTRATIONS/EXAMPLES OF TRADE ADVANCES/C OMMERCIAL TRANSACTIONS HELD TO BE NOT COVERED UNDER SECTION 2 (22)(E) OF THE ACT ARE AS FOLLOWS: (I) ADVANCES WERE MADE BY A COMPANY TO A SISTER CON CERN AND ADJUSTED AGAINST THE DUES FOR JOB WORK DONE BY THE SISTER CONCERN. IT WAS HELD THAT AMOUNTS ADVANCED FOR BUSINESS TRAN SACTIONS DO ITA NO. 2814/DEL/2017 TODAY HOTELS (ANDHRA) PVT. LTD. 5 NOT TO FALL WITHIN THE DEFINITION OF DEEMED DIVIDEN D UNDER SECTION 2(22)(E) OF THE (CIT VS. CREATIVE DYEING & PRINTING PVT. LTD, DELHI HIGH COURT). (II) ADVANCE WAS MADE BY A COMPANY TO ITS SHAREHOLD ER TO INSTALL PLANT AND MACHINERY AT THE SHAREHOLDERS PREMISES T O ENABLE HIM TO DO JOB WORK FOR THE COMPANY SO THAT THE COMPANY COULD FULFIL AN EXPORT ORDER. IT WAS HELD THAT AS THE ASSESSEE P ROVED BUSINESS EXPEDIENCY, THE ADVANCE WAS NOT COVERED BY SECTION 2(22)(E) OF THE (CIT VS AMRIK SINGH, P&H HIGH COURT) (III) A FLOATING SECURITY DEPOSIT WAS GIVEN BY A CO MPANY TO ITS SISTER CONCERN AGAINST THE USE OF ELECTRICITY GENER ATORS BELONGING TO THE SISTER THE COMPANY UTILISED GAS AVAILABLE TO IT FROM GAIL TO GENERATE ELECTRICITY AND SUPPLIED IT TO THE SISTER CONCERN AT CONCESSIONAL RATES. IT WAS HELD THAT THE SECURITY D EPOSIT MADE BY THE COMPANY TO ITS SISTER CONCERN WAS A BUSINESS TR ANSACTION ARISING IN THE NORMAL COURSE OF BUSINESS BETWEEN TW O CONCERNS AND THE TRANSACTION DID NOT ATTRACT SECTION 2(22) ( E) OFTHE ACT. (CIT, AGRA VS ATUL ENGINEERING UDYOG, ALLAHABAD HIG H COURT) 3. IN VIEW OF THE ABOVE IT IS, A SETTLED POSITION T HAT TRADE ADVANCES, WHICH ARE IN THE NATURE OF COMMERCIAL TRANSACTIONS WOULD NOT FALL WITHIN THE AMBIT OF THE WORD ADVANCE IN SECTION 2 (22)(E) OF THE ACT. ACCORDINGLY, HENCEFORTH, APPEALS MAY NOT BE FILED O N THIS GROUND BY OFFICERS OF THE DEPARTMENT AND THOSE ALREADY FILED, IN COURTS /TRIBUNALS MAY BE WITHDRAWN/NOT PRESSED UPON. 4. THE ABOVE MAY BE BROUGHT TO THE NOTICE OF ALL 5. HINDI VERSION FOLLOWS. (NEETIKA BANSAL) DEPUTY SECRETARY TO GOVERNMENT OF INDIA 5. AFTER PERUSING THE JUDGMENT OF THE JURISDICTIONA L HIGH COURT RELIED BY THE LD. CIT(A) IN THE ORDER, FOLLOW ING THE CIRCULAR OF THE CBDT AND LOOKING INTO THE FACTS OF THE INSTANT CASE, WHERE IT CAN BE HELD THAT THE ADVANCE RECEI VED FOR SALE OF PROPERTY RIGHTS IS A COMMERCIAL TRANSACTION IS I N THE NATURE OF ITA NO. 2814/DEL/2017 TODAY HOTELS (ANDHRA) PVT. LTD. 6 TRADE ADVANCE, WE HOLD THAT THE ADVANCE RECEIVED BY THE ASSESSEE CANNOT BE ASSESSED AS DEEMED DIVIDEND. 6. THE ORDER OF THE LD. CIT(A) DOESNT INVITE ANY I NTERFERENCE. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 22/02/2021. SD/- SD/- (SUCHITRA KAMBLE) (DR. B . R. R. KUMAR) JUDICIAL MEMBER ACCOU NTANT MEMBER DATED: 22/02/2021 *SUBODH* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR