DCIT, Bangalore V. Smt. Vaishnavi Tekumalla, Bangalore

ITA 493/BANG/2011

• Counselvise Citation: 49321114 RSA 2011
• Duration Of Justice: 1 year(s) 1 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-06-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 29-04-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ETWA MUNDA CITIIDR
• Assessee Lawyers: C RAMESH
• Keywords: Salary income; Deemed dividend

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI N.K. SAINI, ACCOUNTANT MEMBER AND SHRI N.V. VASUDEVAN, JUDICIAL MEMBER ITA NO.493/BANG/2011 ASSESSMENT YEAR : 2007-08 THE DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE 12(1), BANGALORE. VS. SMT. VAISHNAVI TEKUMALLA, NO.795, 12 TH B CROSS, 23 RD MAIN, J.P. NAGAR 2 ND PHASE, BANGALORE 560 071. PAN: ABPPV 3746C APPELLANT RESPONDENT APPELLANT BY : SHRI ETWA MUNDA, CIT-II(DR) RESPONDENT BY : SHRI C. RAMESH, C.A. DATE OF HEARING : 13.06.2012 DATE OF PRONOUNCEMENT : 13.06.2012 O R D E R PER N.K. SAINI, ACCOUNTANT MEMBER THIS APPEAL BY THE DEPARTMENT IS AGAINST THE ORDE R DATED 22.12.2010 OF THE CIT(APPEALS)-III, BANGALORE. 2. FOLLOWING GROUNDS HAVE BEEN RAISED IN THIS APPEA L: ITA NO.493/BANG2011/ PAGE 2 OF 12 1. THE ORDER OF THE LEARNED CIT(A) IS OPPOSED TO LAW AND FACTS OF THE CASE. 2. THE LEARNED CIT(A) ERRED IN DELETING ADDITION OF RS. 1 CRORE U/S 2(22)(E) HAVING NOT CONSIDERED T HE FACTS AND CIRCUMSTANCES OF THE CASE AND DEFICIENCIE S IN THE AGREEMENT PURPORTED TO BE ENTERED BY THE ASSESS EE AND THE COMPANY FOR PURCHASE OF PROPERTY FROM THE ASSESSEE WHICH PROVE THAT THE AGREEMENT IS NOT GENUINE. THE CIT(A) OUGHT TO HAVE APPRECIATED THAT THE AGREEMENT MADE ON AN UNSTAMPED PAPER WITHOUT COMPLYING WITH THE PROVISIONS OF INDIAN CONTRACT ACT/INDIAN REGISTRATION ACT PRODUCED BY THE ASSESSE E WAS ONLY TO CIRCUMVENT THE PROVISIONS OF SECTION 2(22)(E). 3. THE CIT(A) ALSO FAILED TO APPRECIATE THE APPLICABILITY OF THE DECISION OF HONBLE CALCUTTA H IGH COURT IN THE CASE OF M D JINDAL VS. CIT (1987) 164 ITR 28, TO THE FACTS OF THE PRESENT CASE IN SUPPORT OF THE STAND TAKEN BY THE AO THAT THE SO CALLED AGREEM ENT WAS NOT GENUINE AND WAS AN OSTENSIBLE DEVICE TO CIRCUMVENT THE PROVISIONS OF SECTION 2(22)(E) OF TH E L.T.ACT, 1961. 4. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE CIT(A) IN SO FAR AS IT RELATES TO THE ABOVE GROUNDS MAY BE REVERSED AND THAT OF THE ASSESSING OFFICER MAY B E RESTORED. 5. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND AND/OR DELETE ANY OF THE GROUNDS MENTIONED ABOVE. 3. FROM THE ABOVE GROUNDS, IT WOULD BE CLEAR THAT T HE ONLY GRIEVANCE OF THE DEPARTMENT RELATES TO THE DELETION OF ADDITION OF Q 1 CRORE MADE BY THE AO U/S. 2(22)(E) OF THE INCOME -TAX ACT, 1961 [HEREINAFTER REFERRED TO AS THE ACT IN SHORT ]. ITA NO.493/BANG2011/ PAGE 3 OF 12 4. THE FACTS OF THE CASE IN BRIEF ARE THAT THE ASSE SSEE DERIVED INCOME FROM SALARY, HOUSE PROPERTY AND OTHE R SOURCES. SHE FILED HER RETURN OF INCOME ON 31.07.2007 DECLAR ING AN INCOME OF Q 1,21,571 WHICH WAS PROCESSED U/S. 143(1) OF THE ACT ON 02.07.2008. LATER ON, THE CASE WAS SELECTED FOR SCRUTINY. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTICED THAT THE ASSESSEE POSSESSED 97.83% OF SHARES OF THE COMPANY, M/S. MC CREADE SOFTWARE (ASIA) PVT. LTD. AND HAD RE CEIVED Q 1 CRORE BY WAY OF CHEQUE DATED 06.01.2007. HE ALSO O BSERVED THAT THE SAID COMPANY WAS HAVING ACCUMULATED PROFIT S OF Q 12,47,07,765 AND Q 17,18,54,720 AS ON 31.03.2006 & 31.03.2007 RESPECTIVELY. THE ASSESSING OFFICER ASK ED THE ASSESSEE TO EXPLAIN AS TO WHY THE AMOUNT OF Q 1 CRORE RECEIVED FROM THE COMPANY SHOULD NOT BE TREATED AS DEEMED DI VIDEND U/S. 2(22)(E) OF THE ACT IN THE HANDS OF THE ASSESS EE. 5. IN RESPONSE, THE ASSESSEE PRODUCED A COPY OF AGR EEMENT OF SALE ENTERED INTO WITH THE COMPANY DATED 06.01.2 007 FOR THE PROPERTY AT NO.795, 12 B CROSS, 23 RD MAIN, J.P. NAGAR 2 ND PHASE, BANGALORE AND CONTENDED THAT THE AMOUNT WAS RECEIVED AS ADVANCE FROM THE COMPANY FOR THE SALE OF PROPERT Y OWNED BY HER AS PER THE AGREEMENT OF SALE AND HENCE THE ABOV E AMOUNT COULD NOT BE TREATED AS DEEMED DIVIDEND. THE AO AFT ER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE OBSERVE D THAT THE AGREEMENT WAS NOT EXECUTED ON A STAMP PAPER AND THE DETAILS OF ACQUISITION OF THE PROPERTY TO ASCERTAIN THAT TH E PROPERTY WAS ITA NO.493/BANG2011/ PAGE 4 OF 12 OWNED BY THE ASSESSEE HAS NOT BEEN MENTIONED IN THE AGREEMENT. HE FURTHER OBSERVED THAT THE VALUE OF T HE PROPERTY AS PER THE RECORDS OF SUB-REGISTRAR WAS Q 50,25,000 AND THAT THE ABOVE PROPERTY WAS NOT AVAILABLE IN THE BALANCE SHEET OF THE ASSESSEE AS ON 31.03.2007. HE ALSO OBSERVED THAT T HE ADVANCE PAID BY THE COMPANY WAS IN ADDITION TO THE DIVIDEND OF Q 1,12,88,845 AND THAT THE PURPORTED SALE AGREEMENT O F THE PROPERTY WAS NOT EXECUTED NOR REGISTERED, SO IT WAS TO BE PRESUMED THAT THE INTENTION OF THE COMPANY WAS TO B ENEFIT THE SHAREHOLDER. THE AO WAS OF THE VIEW THAT THE PROVI SIONS OF SECTION 2(22)(E) OF THE ACT WERE APPLICABLE. RELIA NCE WAS PLACED ON THE FOLLOWING CASE LAWS:- (I) M.D. JINDAL V. CIT (1987) 164 ITR 28 (CAL) (II) SMT. TARULATA SHYAM V. CIT (1977) 108 ITR 345 . 6. ACCORDINGLY THE AO CONSIDERED THE AMOUNT OF Q 1 CRORE RECEIVED BY THE ASSESSEE FROM THE COMPANY M/S. MC C READE SOFTWARE (ASIA) PVT. LTD., BANGALORE, AS DEEMED DIV IDEND AND ADDED THE SAME TO THE INCOME OF THE ASSESSEE. 7. THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A PPEALS). THE SUBMISSIONS MADE BY THE ASSESSEE ARE REPRODUCED BY THE LD. CIT(A) IN PARAS 4.1 TO 4.9 OF THE IMPUGNED ORDE R AND READ AS UNDER:- 4.1 AS PER THE AGREEMENT DATED 06.01.2007 THE PROPERTY INTENDED TO BE PURCHASED BY THE COMPANY FROM THE APPELLANT IS A RESIDENTIAL PROPERTY LOCATE D AT NO.795, 12TH B CROSS, 23RD MAIN, J.P. NAGAR 2ND ITA NO.493/BANG2011/ PAGE 5 OF 12 PHASE, BANGALORE MEASURING 134.20 SQ MTRS. THE BUIL T UP AREA IS 1700 SQ FT. THE ASSESSING OFFICER HAS STATED THAT THE MARKET VA LUE OF THE PROPERTY IS RS.50,25,00,000/-. THERE IS NO B ASIS FOR THIS ESTIMATION MADE BY THE ASSESSING OFFICER. THE PROPERTY MEASURES 134.20 SQ MTRS ONLY. THE BUIL T UP AREA IS 1700 SQ FT AND THE PROPERTY IS RESIDENTI AL IN NATURE. IN VIEW OF THIS THE AGREED PRICE OF RS. 1,20,00,000/- IS REASONABLE. THE CONCLUSION OF THE ASSESSING OFFICER, THAT THE AGREEMENT IS A DEVICE TO ADVANCE FUNDS ON THE BASIS OF AN ESTIMATED MARKET VALUE OF RS.50,25,00,000/- IS FACTUALLY NOT CORRECT. 4.2 THE ASSESSING OFFICER STATES THAT THE AGREEMEN T IS NOT ON STAMP PAPER. THE ASSESSING OFFICER ALSO BRINGS OUT THE FACT THAT THE SALE IS NOT YET REGIST ERED. IT IS A FACT THAT THE AGREEMENT IS NOT ON STAMP PAP ER. THE AGREEMENT IS ALSO NOT REGISTERED AND THE SALE I S NOT COMPLETE. BUT IT IS ALSO A FACT THAT THE APPELLANT AFTER HAVING AGREED TO SELL THE PROPERTY TO THE COMPANY H AS ALSO AGREED TO HAND OVER POSSESSION OF THE SAME ON REGISTRATION OF THE PROPERTY. FOR CONCLUDING THE REGISTRATION THE APPELLANT WAS REQUIRED TO OBTAIN T HE FOLLOWING DOCUMENTS. A. ALLOTMENT LETTER FROM BDA B. ABSOLUTE SALE DEED FROM BDA UP TO DATE ENCUMBRANCE CERTIFICATE C. RECEIPTS FOR PAYMENT OF PROPERTY TAXES PAYABLE O N THE SCHEDULE PROPERTY UP TO THE DATE OF DELIVERY OF POSSESSION OF THE SCHEDULE PROPERTY TO THE PURCHASE R D. UPDATED KHATHA CERTIFICATE IN THE NAME OF THE VENDOR E. ANY OTHER DOCUMENTS REQUIRED BY REGISTERING AUTHORITY. THE APPELLANT WAS IN THE PROCESS OF OBTAINING THE ABOVE DOCUMENTS AND THERE HAS BEEN DELAY IN GETTING THE SAME. ITA NO.493/BANG2011/ PAGE 6 OF 12 IN VIEW OF THE ABOVE FACTS WE SUBMIT THAT THE TRANSACTION NOT BEING COMPLETE BE NOT HELD AGAINST THE APPELLANT. 4.3 THE ASSESSING OFFICER HAS RELIED ON THE FOLLOWING DECISIONS IN SUPPORT OF THE STAND THAT TH E ADVANCES ARE ASSESSABLE AS DIVIDEND. I) M.D. JINDAL VS. CIT (1987) 164 ITR 28 (CAL) II) SMT. TARULATA SHYAM VS. CIT (1977) 108 ITR 345 (SC) BOTH THE CASES ARE NOT APPLICABLE TO THE FACTS OF T HE APPELLANT. AS BROUGHT OUT BY THE ASSESSING OFFICER IN PARA 6.2 OF HIS ORDER, IN THE CASE OF M.D. JINDAL VS. CIT (1987 ) 164 ITR 28 (CAL) THE FACTS WERE THAT THE COMPANY HA D MADE ADVANCES TO THE ASSESSEE BY WAY OF TRANSFER OF GOODS. IT WAS HELD THAT SINCE THE ASSESSEE WAS BENEFITED, THE SAME WAS TO BE TREATED AS DIVIDENDS. AS COULD BE SEEN, THE FACTS WERE THAT INSTEAD OF ADVAN CE OF MONEY, ADVANCE OF GOODS WERE MADE. THE HONBLE HIGH COURT HAS HELD THAT IRRESPECTIVE OF THE FACT T HAT THERE IS ADVANCE OF GOODS, SINCE THE SHARE HOLDER H AS BEEN BENEFITED, SUCH BENEFIT IS TAXABLE AS DIVIDEND . THIS IS NOT A CASE IN RESPECT OF TRANSACTION OF THE APPELLANT. IN THE CASE OF THE APPELLANT THE ADVANCE IS MADE FOR PURCHASE OF THE PROPERTY. THE APPELLANT IS REQUIRED TO TRANSFER THE PROPERTY. THE TRANSACTION IS IN LIEU OF AN IMMOVABLE PROPERTY OWNED BY THE APPELLAN T AND TO BE TRANSFERRED AND THEREFORE THERE IS NO BEN EFIT ACCRUING TO THE APPELLANT. THE DECISION IS NOT APPLICABLE TO THE FACTS OF THE APPELLANT. IN PARA 6.3 OF THE ORDER THE FACTS OF THE DECISION OF THE CASE OF SMT. THARULATHA SHYAM VS. CIT (1977) 108 ITR 345 (SC) HAS BEEN DISCUSSED. IN THE SAID DECISI ON IT IS HELD THAT THE PROVISIONS OF SECTION 2(22) (E) OF THE ACT ARE ATTRACTED IF ALL THE CONDITIONS SET OUT IN THE PROVISION ARE SATISFIED AT THE TIME OF MAKING THE ADVANCE. THIS DECISION IS RELEVANT IN A CASE WHERE AN ADVANCE IS MADE AND AS ON THE LAST DAY OF THE ACCOUNTING YEAR SUCH ADVANCE MAY NOT BE OUTSTANDING . THE DECISION SQUARELY APPLIES TO CASES WHERE LOAN O R ADVANCE IS MADE WITHOUT THE ASSESSEE REQUIRING TO TRANSFER ANY ASSET OR RENDER SERVICES IN RETURN. TH E CASE IS NOT APPLICABLE TO THE APPELLANT, SINCE THE ITA NO.493/BANG2011/ PAGE 7 OF 12 APPELLANT IS REQUIRED TO TRANSFER THE IMMOVABLE PROPERTY IN LIEU OF THE ADVANCE RECEIVED. UNDER THE ABOVE CIRCUMSTANCES THE DECISIONS RELIED UPON BY THE ASSESSING OFFICER ARE NOT APPLICABLE TO THE APPELLANT. 4.4 THE APPELLANT SUBMITS THAT THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT HAS BROUGHT IN ONLY A L EGAL FICTION. IT IS A DECIDED POSITION OF LAW THAT IN CONSTRUING THE FICTION IT IS NOT TO BE EXTENDED BEY OND THE PURPOSE FOR WHICH IT WAS CREATED. RELIANCE IS PLACED ON THE FOLLOWING DECISIONS I) MANCHERI PUTHUSSERI AHMED VS. KUTHIRAVATTAM ESTATE RECEIVER, AIR 1997 SC 208, 214 II) CIT VS. SHAKUNTALA (1961) 43 ITR 352, 357 (SC) III) CIT VS. MOON MILLS LTD (1966) 59 ITR 574, 579 (SC) THE CONCEPT OF DEEMED DIVIDEND IS IN SITUATION WHER E A SHARE HOLDER HAVING SUBSTANTIAL INTEREST IN THE COMPANY IS BENEFITED BY WAY OF LOAN OR ADVANCE MADE OUT OF ACCUMULATED PROFITS, SO THAT SUCH FUNDS ARE AVAILABLE FOR HIS USE. IN THE CASE OF THE APPELLANT THE ADVANCE IS MADE FOR THE PURCHASE OF PROPERTY. NO BENEFIT ACCRUES TO THE APPELLANT SINCE THE APPELLAN T IS TRANSFERRING THE PROPERTY. THIS IS PURELY A BUSINES S TRANSACTION. UNDER THE CIRCUMSTANCES THE LEGAL FICT ION CREATED UNDER LAW CANNOT BE E TENDED TO COVER THE TRANSACTION. 4.5 THE APPELLANT FURTHER RELIES ON THE DECISION O F SUPREME COURT IN THE CASE OF NAVANITHLAL C. JAVERI VS. K.K.SAIN. (1965) 56 ITR 198, 207 - 208 (SC) WHICH DISCUSSES IN DETAIL THE MISCHIEF SOUGHT TO BE CURED BY SECTION 2(22)(E) OF THE ACT. IN THE SAID DECISION I T HAS BEEN CLEARLY STATED THAT WHERE THE VOTING POWER LIE S IN THE HANDS OF FEW PERSONS OTHER THAN PUBLIC AND SUCH PERSONS SUBSTANTIALLY CONTROL THE COMPANY, INSTEAD OF DISTRIBUTING DIVIDENDS ON WHICH THE SHARE HOLDER OT HER WISE SHOULD HAVE PAID TAXES, THE COMPANY MAY CHOOSE TO ADVANCE MONIES TO THEM OUT OF ACCUMULATED PROFIT S AND THERE IS TAX EVASION IN THE HANDS OF THE SHARE HOLDER DESPITE THE PROFITS BEING AVAILABLE TO HIM F OR UTILITY. THIS IS THE CIRCUMSTANCE WHICH IS SOUGHT T O BE CURED BY THE PROVISIONS OF SECTION 2(22) (E) OF THE ACT. PRIMARILY THE PURPOSE OF PAYMENT SHOULD BE TO MAKE ITA NO.493/BANG2011/ PAGE 8 OF 12 FUNDS AVAILABLE OUT OF ACCUMULATED PROFITS TO THE UTILITY OF THE SHARE HOLDERS, WHO IN FACT TAKE DECI SIONS ON BEHALF OF THE COMPANY BY VIRTUE OF HOLDING SHARE S REPRESENTING SUBSTANTIAL VOTING POWER AND AVOID PAYMENT OF TAXES BY NOT CONSIDERING THE FUNDS DRAWN AS DIVIDEND. THOUGH THERE HAS BEEN AN AMENDMENT TO THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT IN 19 87 THE PRINCIPLE LAID DOWN BY THE SUPREME COURT IN REGARD TO THE INTENTION OF THE LEGISLATION DOES NOT CHANGE. THE RATIO LAID DOWN IN THIS DECISION COUPLE D WITH THE FACT THAT THE DEEMED FICTION CANNOT BE EXTENDED BEYOND THE INTENTION OF THE LEGISLATION, T HE PROVISIONS OF SECTION 2(22)(E) OF THE ACT WILL NOT APPLY TO THE FACTS OF THE CASE, SINCE THE ADVANCES ARE MA DE AGAINST PURCHASE OF PROPERTY. THE INTENTION IS NOT TO BENEFIT THE SHARE HOLDER. 4.6 THE APPELLANT FURTHER SUBMITS THAT THE WORD LO AN MEANS A LENDING. IT IS THE DELIVERY BY ONE PARTY AN D RECEIPT BY ANOTHER PARTY OF A SUM OF MONEY UPON AN AGREEMENT EITHER EXPRESSED OR IMPLIED TO REPAY IT W ITH OR WITHOUT INTEREST. THIS VIEW IN REGARD TO THE DEFINITION OF LOANS OR ADVANCE HAS BEEN EXPRESSED I N THE DECISION OF MADRAS HIGH COURT IN THE CASE OF G.R.GOVINDARAJULU NAIDU VS. CIT (1973) 90 ITR 13 (MAD). EVEN IN THE DECISION OF SUPREME COURT IN THE CASE OF BOMBAY STEAM NAVIGATION COMPANY (1953) PVT LTD VS. CIT (1965) 56 ITR 52 (SC) THE SAME VIEW HAS BEEN UPHELD. IN THE CASE OF THE APPELLANT WHAT IS AGREED UPON IS TRANSFER OF IMMOVABLE PROPERTY AND T HE ADVANCE IS A PART PAYMENT OF THE PROCEEDS. THE ADVANCE RECEIVED IS NOT INTENDED TO BE REPAID. UNDE R THE CIRCUMSTANCES THE ADVANCE MADE FOR PURCHASE OF PROPERTY CANNOT BE CONSIDERED AS DIVIDEND WITHIN TH E MEANING OF SECTION 2(22)(E) OF THE ACT. 4.7 THE APPELLANT RELIES ON THE DECISION OF DELHI ITAT IN THE CASE OF SUNIL SETHI VS DCIT IN LTA NO.2131/DELHI/2007. IN THE SAID DECISION IT HAS BEE N HELD THAT WHERE THERE IS DOCUMENTARY EVIDENCE ON RECORD TO SUBSTANTIATE THE FACT THAT ADVANCES WERE MADE DURING THE COURSE OF BUSINESS ACTIVITY OF THE ASSESSEE THE SAME CANNOT BE CONSIDERED AS DIVIDENDS . IN THE CASE OF THE APPELLANT THE COMPANY HAS ADVANC ED TO THE SHARE HOLDER FOR PURCHASE OF PROPERTY AND THEREFORE CANNOT BE HELD AS DIVIDENDS. ITA NO.493/BANG2011/ PAGE 9 OF 12 4.8 THE APPELLANT ALSO RELIES ON THE DECISION OF CHENNAI HIGH COURT IN THE CASE OF CIT VS. F. PRAVEE N, 220 ITR 639. IN THE SAID CASE THE ASSESSEE HAD RECEIVED ADVANCE FROM THE COMPANY FOR SALE OF PROPERTY BELONGING TO HIM. FOR SOME REASON THE DEAL DID NOT MATERIALIZE AND THE ASSESSEE RETURNED THE ADVANCE. THE HONBLE HIGH COURT CONSIDERING THE FAC TS AND CIRCUMSTANCES HAS HELD THAT THE TRANSACTION CAN NOT BE BROUGHT UNDER THE PROVISIONS OF SECTION 2(22) (E ) OF THE ACT. 4.9 THE APPELLANT ALSO RELIES ON THE FOLLOWING DECISIONS WHEREIN IT HAS BEEN HELD THAT THE CONCEPT OF LOAN OR ADVANCE CONTEMPLATED UNDER THE PROVISIONS O F THE ACT IS IN THE NATURE OF LENDING MONEY. IF THE ADVANCES ARE NOT IN THE NATURE OF LENDING MONEY AND MADE DURING THE COURSE OF BUSINESS, THE SAME CANNOT BE HELD AS DIVIDENDS. I) DCIT VS. LAKRA BROS. 162 TAXMAN 170 (CHANDIGARH) II) CIT VS RAJKUMAR (2010) 228 CTR 506 (DELHI) III) BHARAT C. GANDHI VS. ACIT (2009) 178 TAXMAN 83 (MUM) IV) ITO VS. USHA COMMERCIAL (P) LTD (2009) 120 TTJ 925 (MUM) V) CIT VS. CREATIVE DYING & PRINTING (P) LTD (2009 ) 318 ITR 476 IN THE CASE OF THE APPELLANT SINCE THE ADVANCES MAD E ARE NOT WITH A REQUIREMENT TO BE RETURNED BUT FOR TRANSFERRING THE IMMOVABLE PROPERTY, THE RATIOS LAI D DOWN IN THE ABOVE DECISIONS ARE APPLICABLE. 8. THE LD. CIT(APPEALS) AFTER CONSIDERING THE SUBMI SSIONS OF THE ASSESSEE AND THE RATIO LAID DOWN IN THE CASES R ELIED BY THE ASSESSEE, HELD THAT THE ADVANCE OF Q 1 CRORE MADE TO THE ASSESSEE BY THE COMPANY WAS FOR THE PURPOSE OF PURC HASE OF PROPERTY DURING THE COURSE OF BUSINESS ACTIVITY OF THE COMPANY, THEREFORE IT WAS NOT HIT BY THE PROVISIONS OF SECTI ON 2(22)(E) OF ITA NO.493/BANG2011/ PAGE 10 OF 12 THE ACT. ACCORDINGLY THE ADDITION MADE BY THE AO W AS DELETED. NOW THE DEPARTMENT IS IN APPEAL. 9. THE LD. DR STRONGLY SUPPORTED THE ORDER OF THE A SSESSING OFFICER AND REITERATED THE OBSERVATIONS MADE BY THE AO IN PARAS 6 TO 8 OF THE ASSESSMENT ORDER DATED 22.12.2009. H E FURTHER SUBMITTED THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN DELETING THE ADDITION MADE BY THE AO. 10. IN HIS RIVAL SUBMISSIONS, THE LD. COUNSEL FOR T HE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORIT IES BELOW AND FURTHER SUBMITTED THAT THE ASSESSEE RECEIVED AD VANCE AGAINST THE PROPERTY WHICH WAS TO BE SOLD TO M/S. M C CREADE SOFTWARE (ASIA) PVT. LTD. IT WAS FURTHER STATED TH AT THE ADVANCE WAS TAKEN AGAINST THE SALE OF PROPERTY WHICH COULD NOT BE TRANSFERRED TO THE COMPANY DUE TO CERTAIN FORMALITI ES WHICH WERE TO BE FULFILLED, SO THERE WAS NO QUESTION OF INVOKI NG THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT AND MAKIN G THE ADDITION BY CONSIDERING THE ADVANCE AMOUNT AS DEEMED DIVIDEN D, THEREFORE THE LD. CIT(A) WAS FULLY JUSTIFIED IN DEL ETING THE ADDITION MADE BY THE AO. 11. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE O N RECORD. IN THE PRESENT CASE, IT IS NOT IN DISPUTE THAT THE ASS ESSEE HELD 97.83% SHARES IN THE COMPANY FROM WHICH ADVANCE OF Q 1 CRORE WAS RECEIVED BY THE ASSESSEE AGAINST THE SALE OF PR OPERTY BELONGING TO HER. THE ASSESSEE FURNISHED A COPY OF THE ITA NO.493/BANG2011/ PAGE 11 OF 12 AGREEMENT TO SELL BEFORE THE AO, WHO DID NOT ACCEPT THAT AGREEMENT AS GENUINE FOR THE REASON THAT IT WAS NOT REGISTERED AND WAS ALSO NOT ON THE STAMP PAPER, HOWEVER, NOTHI NG WAS BROUGHT ON RECORD TO SUBSTANTIATE THAT THERE WAS NO T AN AGREEMENT BETWEEN THE ASSESSEE AND THE COMPANY M/S. MC CREADE SOFTWARE (ASIA) PVT. LTD. FOR THE SALE OF PR OPERTY BELONGING TO THE ASSESSEE. WHEN THERE WAS AN AGRE EMENT BETWEEN THE ASSESSEE AND THE COMPANY FOR SALE OF PR OPERTY BELONGING TO THE ASSESSEE, IT CANNOT BE SAID THAT T HE AGREEMENT WAS NOT GENUINE ONLY FOR THE REASON THAT IT WAS NOT REGISTERED, PARTICULARLY WHEN THE AO DID NOT BRING ANY MATERIAL ON RECORD TO SUBSTANTIATE THAT THE SAID AGREEMENT WAS NOT A GENU INE AGREEMENT. IN THE INSTANT CASE, THE ASSESSEE RECEI VED THE ADVANCE AGAINST THE SALE OF PROPERTY LOCATED AT NO. 795, 12 TH B CROSS, 23 RD MAIN, J.P. NAGAR 2 ND PHASE, BANGALORE AND THE AGREED PRICE FOR SALE WAS Q 1,20,00,000 AGAINST WHICH THE ASSESSEE RECEIVED AN ADVANCE OF Q 1 CRORE. IN OUR OPINION, WHEN THE ADVANCE RECEIVED BY THE ASSESSEE FROM THE COMPANY IN WHICH SHE IS A SUBSTANTIAL SHAREHOLDER, WAS FOR A TRANSACTION RELATING TO SALE OF PROPERTY, THE DEEMING PROVISION S OF SECTION 2(22)(E) OF THE ACT WERE NOT APPLICABLE. IF THE AD VANCE WAS NOT IN THE NATURE OF LENDING MONEY, IT CANNOT BE HELD A S DIVIDEND. IN THE PRESENT CASE, THE ASSESSEE RECEIVED THE ADVANCE AGAINST SALE OF PROPERTY BELONGING TO HER, THEREFORE THE TR ANSACTION COULD NOT BE BROUGHT UNDER THE PROVISIONS OF SECTION 2(22 )(E) OF THE ITA NO.493/BANG2011/ PAGE 12 OF 12 ACT. WE THEREFORE DO NOT SEE ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A) ON THIS ISSUE. ACCORDINGLY WE DO NOT SEE AN Y MERIT IN THE APPEAL BY THE DEPARTMENT. 12. IN THE RESULT, THE APPEAL BY THE DEPARTMENT IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON THIS 13 TH DAY OF JUNE, 2012. SD/- SD/- ( N.V. VASUDEVAN ) ( N.K. SAINI ) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE, DATED, THE 13 TH JUNE , 2012. DS/- COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY ITAT, BANGALORE.