ACIT-Circle 2 (1), Panaji V. Mr. Shelly Gonsalves, Goa

ITA 58/PAN/2013

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 5223 (ITAT-PANAJI)
• Duration Of Justice: 6 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-09-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 22-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BANJUL BARTHAKUR
• Assessee Lawyers: V L JAIN
• Keywords: Deemed dividend

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI BENCH, PANAJI BEFORE SHRI P. K. BANSAL, HONBLE ACCOUNTANT MEMBER AND SHRI D.T. GARASIA, HONBLE JUDICIAL MEMBER ITA NO. 58/PNJ/2013 (ASSESSMENT YEAR-2007-08) THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-2(1), PANAJI, GOA, (APPELLANT) VS. MR. SHELLY GONSALVES H.N. 566, MUROD WADDO, CANDOLIM, BARDEZ-GOA PAN: ACVPG0642H (RESPONDENT) ITA NO. 59/PNJ/2013 (ASSESSMENT YEAR-2007-08) THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-2(1), PANAJI, GOA, (APPELLANT) VS. MRS. THERESA GONSALVES H.NO. 566, MUROD WADDO, CANDOLIM, BARDEZ-GOA PAN: ACVPG0641F (RESPONDENT) APPELLANT BY : MR. BANJUL BARTHAKUR, DR RESPONDENT BY : MR. V. L. JAIN, CA DATE OF HEARING : 24/09/2013 DATE OF ORDER : 27/ 09/2013 O R D E R PER: D.T.GARASIA (JM) BOTH THESE APPEALS ARE FILE BY THE DEPARTMENT AGAINST THE ORDER OF CIT(A)-2, DATED 06.02.2013, FOR ASSESSMENT YEAR 2007-08. 2. THE FOLLOWING COMMON GROUNDS ARE RAISED IN THESE APPEALS READ AS UNDER: ( I.) THE LEARNED CIT(A) HAS ERRED IN DELETING THE ADDITIONS MADE UNDER SECTION. 2(22) (E) AS DEEMED DIVIDEND OF RS. 60,00,000/- BEING 50% OF ADVANCE OF RS.1,20,00,000/- TAKEN FROM REGAL BUILDERS GOA (P) LTD. 2 ITA NO. 58 & 59 (AY-2007-08) (II) THE LEARNED CIT(A) OUGHT TO HAVE CONSIDERED THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF TARULATA SHYAM REPORTED IN 108 ITR 345, WHICH IS SQUARELY APPLICABLE IN THE PRESENT CASE. 3. THE SHORT FACTS OF THE CASE ARE AS UNDER: DURING THE COURSE OF ASSESSMENT PROCEEDING THE AO OBSERVED THAT THE ASSESSEE HAD RECEIVED THE ADVANCE FROM M/S. REGAL BUILDERS (GOA) PVT. LTD., AMOUNTING TO RS.49,00,561.36. THE ASSESSEE HAD RECEIVED A SUM OF RS.1,20,00,000/- SEPARATELY. THE ASSESSEE WAS GIVEN SHOW CAUSE NOTICE TO CLARIFY THE NATURE OF THESE RECEIPTS AND AS TO WHY THE SAME SHOULD NOT BE INCLUDED FOR TAXATION IN THE HANDS OF ASSESSEE AS DEEMED DIVIDEND UNDER SECTION 2(22)(E). THE ASSESSEE HAS TAKEN THE CONTENTION THAT HE HAD RECEIVED THE AMOUNT FROM THE PURCHASE OF THE PROPERTY NAMELY REGAL HIDEWAY ON BEHALF OF REGALTHIS PART OF THE TRANSACTION IS AS PER THE SUBMISSIONS OF THE ASSESSEE. THE ISSUE HOWEVER NEEDS TO BE CONSIDERED IS WHETHER THIS AMOUNT TOOK ON THE COMPLEXION OF AN ADVANCE TAKEN BY THE ASSESSEE FROM REGAL BUILDERS (GOA) PVT. LTD. IN THIS CONTEXT IT IS NOTED THAT THE ASSESSEE HAS SHOWN THE AMOUNT OF RS. 1,20,00,000/- IN HIS BOOKS OF ACCOUNTS A AS AN ADVANCE FROM REGAL BUILDERS (GOA) PVT. LTD., WHICH WAS SUBSEQUENTLY REPAID. THE LEDGER ACCOUNT OF REGAL BUILDERS KEPT BY THE ASSESSEE SHOWN RECEIPT OF THE SAID AMOUNT OF RS.1,20,00,000/- ON 11.11.2006. INTERESTINGLY, WHEREAS THE ASSESSEE HAS CLAIMED THAT THE PAYMENT WAS REMITTED BY HIM TO REGAL BUILDERS (GOA) PVT. LTD. ON 16.11.2006 I.E., AFTER A PERIOD OF 5 DAYS, HOWEVER, THE BOOKS OF ACCOUNT OF REGAL BUILDERS (GOA) PVT. LTD. SHOW THE RECEIPT OF RS. 1,20,00,000/- ON ACCOUNT OF SALE OF PROPERTY TO THE PURCHASER NAMELY, REGAL HIDEAWAY, ON 22,01,2007. AS PER THIS, THE ASSESSEE HAD KEPT THE ADVANCE WITH HIM FOR MORE THAN TWO MONTHS. THE PERIOD FOR WHICH THE ADVANCE OF RS. 1.20,00,000/- FROM REGAL BUILDERS (GOA) PVT. LTD. WAS KEPT BY THE ASSESSEE MAY HOWEVER BE OF NO RELEVANCE AS THE PAYMENT OF RS. 1,20,00,000/- HAD BEEN RECEIVED BY HIM ON BEHALF OF REGAL BUILDERS (GOA) PVT. LTD., BECAUSE THE PAYMENT WAS MADE TOWARDS THE PURCHASE PRICE FOR SALE OF A PROPERTY THAT WAS OWNED BY REGAL BUILDERS (GOA) PVT. LTD., ACCORDINGLY, THE AMOUNT OF RS. 1,20,00,000/- RECEIVED BY THE ASSESSEE PARTAKES THE NATURE OF AN ADVANCE TO THE ASSESSEE BY A PRIVATE LIMITED COMPANY I.E., REGAL BUILDERS (GOA) PVT. LTD., IN WHICH THE ASSESSEE HAS SUBSTANTIAL INTEREST. THEREFORE, AO HAD ADDED AMOUNT OF RS.1,20,00,000/- AS DEEMED DIVIDEND UNDER SECTION 2(22(E) CANNOT OF THE INCOME TAX ACT 1961. THE ASSESSEE IS COVERED UNDER SECTION 5A OF THE INCOME TAX ACT. ACCORDINGLY, 50% OF THIS AMOUNT IS TAXED IN THE HANDS OF ASSESSEE AND 50% ASSESSED IN HANDS OF SPOUSE MR. THERESA GONSALVES IN ITA NO. 59/ PNJ/2013. 3 ITA NO. 58 & 59 (AY-2007-08) 3.1 THE MATTER CARRIED TO CIT(A) AND CIT(A) HAS DELETED THE ADDITION BY OBSERVING AS UNDER: I FIND THAT THE ARGUMENT OF THE LEARNED COUNSEL DR. VARDHANMAN JAIN, FCA AR IS ACCEPTED IN THE SENSE THAT ON THESE FACTS, PROVISIONS OF DEEMED DIVIDEND UNDER SECTION 2(22)(E) CANNOT BE INVOKED IN THE CASE OF THE ASSESSEE. M/S. REGAL BUILDERS (GOA) PVT. LTD., IN WHICH THE ASSESSEE, MR. SHELLEY GONSALVES HAS SUBSTANTIAL INTEREST, HAS NOT MADE ANY PAYMENT TO THE ASSESSEE. ON THE CONTRARY THE ASSESSEE IMMEDIATELY TRANSFERRED THE FUND TO THE COMPANY M/S. REGAL BUILDERS (GOA) PVT. LTD. WITHIN A VERY SHORT SPAIN. WHEN NO PAYMENT HAS BEEN MADE TO THE ASSESSEE, BY THE COMPANY IN WHICH THE ASSESSEE THE ASSESSEE HAS SUBSTANTIAL INTEREST, HOW CAN THE PROVISIONS OF SECTION 2(22)(E) BE INVOKED. THE NATURE OF TRANSACTION IS OF NORMAL BUSINESS TRANSACTION AND NO BENEFIT OF ANY SORT IS DERIVED BY THE ASSESSEE. THEREFORE, I DIRECT THE A.O TO DELETE THE ADDITION OF RS. 60,00,000/- (50% OF RS. 1.2 CRORE) AS PROVISIONS UNDER SECTION 2(22)(E) WERE WRONGLY APPLIED IN VIEW OF THE FACTS OF THE INSTANT CASE. MRS. THERESA GONSALVES ALSO GETS THE RELIEF AS SHE IS COVERED UNDER SECTION 5A OF THE I.T. ACT FOR A SIMILAR AMOUNT, I.E., RS. 60,00,000/-. THE APPEAL OF THE ASSESSEE IS ALLOWED. 3.2 WE HAVE HEARD THE RIVAL CONTENTION OF BOTH THE PARTIES. LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT REGAL BUILDERS (GOA) PVT. LTD. SOLD A PROPERTY TO MS. REGAL HIDEAWAY. IN THE LAND RECORDS, THE PROPERTY WAS IN THE NAME OF THE ASSESSEE I.E., MR. SHELLEY GONSALVES. M/S. SHELLEY GONSALVES HAD SUBSTANTIAL INTEREST IN M/S REGAL BUILDERS (GOA) PVT. LTD. M/S. REGAL HIDEAWAY SAID THAT SINCE THE LAND RECORDS PROPERTY IS IN THE NAME OF MR. GONSALVES ONLY TO MR. GONSALVES ONLY. MR. SHELLEY GONSALVES HAS NO INTEREST IN TERMS OF SHAREHOLDING IN M/S REGAL HIDEAWAY. MR. REGAL HIDEAWAY MADE THE PAYENT TO MR. SHELLEY GONSALVES ON 11.11.2006. MR. SHELLY GONSALVES TRANSFERRED THE AMOUNT IN QUESTION TO MS. REGAL BUILDERS (GOA) PVT. LTD. ON 16.11.2006. 3.3 THE ASSESSEE HAS SUBMITTED ALL THE COPIES OF BANK ACCOUNTS, SALE/PURCHASE AGREEMENT WHICH SHOWS THAT THE ASSESSEE HAS NO INTEREST IN THE PROPERTY. WE FIND THAT BOTH THE ASSESSEES HAVE NOT RECEIVED ANY PAYMENT FROM THE COMPANY M/S. REGAL BUILDERS (GOA) PVT. LTD., IN WHICH THE ASSESSEE HAS SUBSTANTIAL INTEREST, THEREFORE, THERE IS NO DEEMED DIVIDEND UNDER SECTION 2(22)(E) OF THE ACT. WE FIND THAT WHETHER SALE BY THE COMPANY THROUGH THE PETITIONER IN WHOSE NAME LAND IS REGISTERED IN LAND RECORDS CONSTITUTE LOAN OR ADVANCE OR ANY PAYMENT ON BEHALF OF THE BENEFICIAL SHARE HOLDER OR FOR THE 4 ITA NO. 58 & 59 (AY-2007-08) INDIVIDUAL BENEFIT. WE FIND THAT NO TRANSACTION TO COME WITHIN THE ORBIT OF SECTION 2(22)(E) OF IT ACT.1961. THE PAYMENT SHOULD BE MADE BY THE COMPANY TO THE ASSESSEE BUT IN THE INSTANT CASE THE ASSESSEE ACTED AS FACILITATOR AS THE PROPERTY WAS REGISTERED IN HIS NAME AND TO CONVEY THE TITLE AND ASSESSEE HAD TO EXECUTE THE SALE DEED AND COLLECT THE PAYMENT. THE SALE PROCEEDS WERE RECEIVED AND PAID BACK TO THE COMPANY AND PROFIT ON THE SAID IMMOVABLE PROPERTY IS TAXED IN THE HANDS OF THE COMPANY. THEREFORE, WE ARE OF THE VIEW THERE IS NO ELEMENT OF PAYMENT COVERED IN UNDER SECTION 2(22)(E) OF THE INCOME TAX ACT 1961. THEREFORE CIT(A) JUSTIFIED IN HIS ACTION. THE DEPARTMENT HAS RELIED UPON THE DECISION OF SUPREME COURT IN THE CASE OF TARULATA SHYAM 108 ITR 345(SC). IN THAT CASE THE FACTS ARE ENTIRELY DIFFERENT AND THE ASSESSEE WAS INTERESTED AS A SHAREHOLDER WHEREIN IN THE INSTANT CASE THE ASSESSEE IS NOT A SHAREHOLDER AND ASSESSEE HAS NO INTEREST IN TERMS OF SHARE HOLDING OF M/S. REGAL HIDEAWAY. THEREFORE, WE ARE OF THE VIEW THAT THIS DECISION IS NOT APPLICABLE TO THE ASSESSEE. IN THE RESULT WE CONFIRM THE ACTION OF THE CIT(A). 4. IN THE RESULT, BOTH THE APPEALS FILED BY THE DEPARTMENT ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 27.09.2013. SD/- SD/- ( P.K. BANSAL) (D.T. GARASIA) ACCOUNTANT MEMBER JUDICIAL MEMBER PLACE : PANAJI / GOA DATED : 27.09.2013 P.S.- *PK* COPY TO : (1) APPELLANT (2) RESPONDENT (3) CIT CONCERNED (4) CIT (5) D.R (6) GUARD FILE TRUE COPY, BY ORDER PRIVATE SECRETARY, ITAT, PANAJI, GOA