ACIT, Non Corp Cit 7(1), Chennai V. Jethanand Thakur Bakshani, Chennai

ITA 883/CHNY/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 3281 (ITAT-CHENNAI)
• Duration Of Justice: 10 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-02-2020
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2014-2015
• Appeal Filed On: 01-04-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: M KARUNAKARAN
• Keywords: Deemed dividend; Set aside
• Section: 2(22)(e); 22; 27

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHE NNAI . . . , , ! BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI S. JAYARAMAN, ACCOUNTANT MEMBER /. I.T.A. NO. 883/CHNY/2019 / ASSESSMENT YEAR : 2014-15 ASSISTANT COMMISSIONER OF INCOME TAX, NON CORPORATE CIRCLE 7(1), 121, MAHATMA GANDHI ROAD, CHENNAI 600 034. VS. SHRI. JETHANAND THAKUR BAKSHANI, NO. 14, I BLOCK, ANNA NAGAR EAST, CHENNAI 600 040. [PAN: AACPB 6509M] ( / APPELLANT) ( '#$% /RESPONDENT ) $%&' / APPELLANT BY : SHRI. AR.V. SREENIVASAN, JCIT '#$%&' / RESPONDENT BY : SHRI. M. KARUNAKARAN, ADVOCATE ) &* /DATE OF HEARING : 27.11.2019 +,- &* /DATE OF PRONOUNCEMENT : 25. 02.2020 / O R D E R PER S. JAYARAMAN, ACCOUNTANT MEMBER: THE REVENUE FILED THIS APPEAL AGAINST THE ORDER O F THE COMMISSIONER OF INCOME TAX (APPEALS) 7, CHENNAI IN ITA NO. 132/CIT(A)-7/2016-17 DATED 30.01.2019 FOR ASSESSMEN T YEAR 2014-15. :-2-: ITA NO.883/CHNY/2019 2. SHRI. JETHANAND THAKUR BAKSHANI, THE ASSESSEE, A N INDIVIDUAL AND THE MANAGING DIRECTOR OF M/S. BNT CONNECTIONS IMPAC TS LIMITED, A PUBLIC LIMITED COMPANY ENGAGED IN THE BUSINESS OF M ANUFACTURE AND EXPORT OF READYMADE GARMENTS. THE SHARES OF THE CO MPANY WERE HELD BY THE ASSESSEE AND HIS BROTHER AND THE ASSESSEE OW NED 85% OF THE STAKE IN THE COMPANY. THE ASSESSEE IS ALSO THE SOLE PROPRIETOR OF M/S. BNT CONNECTIONS. DURING THE F Y 2005-06, ALL THE LI ABILITY AND ASSETS, EXCEPT THE LAND AND BUILDING SITUATED IN PERAMBUR O F M/S. BNT CONNECTIONS WAS TAKEN OVER BY M/S. BNT CONNECTIO NS IMPACTS LIMITED. DURING THE YEAR 2011-12, THE COMPANY ENTER ED IN TO SALE AGREEMENT WITH THE ASSESSEE FOR THE PURCHASE OF THE LAND AND BUILDING SITUATED IN PERAMBUR FOR A SALE CONSIDERATION OF RS 10 CRORES AND IN PURSUANCE OF THE AGREEMENT, THE COMPANY MADE A PRO PERTY ADVANCE DURING THE FINANCIAL YEARS VIZ, (F Y) 201112: RS 10,00000, FY 2012-13: RS .1,35,00,000, FY201314 :RS. 2.31,00,000. ON 05. 12.2013, THE TWO PARTIES EXTENDED THE PERIOD OF AGREEMENT FOR ONE MO RE YEAR THAT IS STILL 31.03.2016 AND FURTHER AN ADVANCE OF RS.79 LAKHS W AS PAID AND THUS A TOTAL OF RS. 4,55,00,000 PAID. WHILE MAKING THE ASS ESSMENT FOR THE AY 20014-15, THE A O CONSIDERED THESE TRANSACTIONS AND THE ASSESSEES EXPLANATION, MATERIAL ETC AND TREATED RS 2.31 CRO RE AS DEEMED DIVIDEND . THE AO ALSO FOUND THAT THE ASSESSEE HAS NOT RECEIVED ANY RENTAL INCOME FOR THE USE OF ITS LAND AND BUILDING SITUATED IN PERAMBUR :-3-: ITA NO.883/CHNY/2019 FROM 2005 ONWARDS AND FOUND THAT FROM APRIL 2015 O NWARDS, STARTED COLLECTING RENT OF RS.5LAKHS PER MONTH . THEREFORE, THE A O CHARGED RS 60 LAKHS AS RENTAL INCOME AND AFTER ALLOWING THE DE DUCTION U/S 24 , ASSESSED RS.42 LAKHS AS INCOME FROM THE HOUSE PROPE RTY AND COMPLETED THE ASSESSMENT. AGGRIEVED THE ASSESSEE FILED AN APP EAL BEFORE THE CIT(A) AND THE LD CIT(A) ALLOWED THE APPEAL. AGGRIE VED AGAINST THE ORDER OF THE LD CIT(A), THE REVENUE FILED THIS A PPEAL WITH FOLLOWING GROUNDS OF APPEAL. 1.THE ORDER OF THE LEARNED COMMISSIONER OF LNCOME TAX (APPEALS) IS CONTRARY TO THE LAW AND FACTS OF THE CASE. 2. THE CIT(A) ERRED IN DELETING THE ADDITION MADE U LS.2(22)(E) OF THE ACT FOR RS.2,31,00,000/- BY HOLDING THAT ADVANCE RECEI VED TOWARDS SALE OF PROPERTY FALLS WITHIN THE MEANING OF COMMERCIAL AND BUSINESS PURPOSE AND CANNOT BE TREATED AS DEEMED DIVIDEND WITHOUT CO NSIDERING THE TRUE NATURE OF THE TRANSACTION. 3. THE CIT(A) RELIED ON THE JURISDICTIONAL TRIBUNAL 'S DECISION IN THE CASE OF G SREEVIDYA, CHENNAI VS DEPARTMENT OF LNCOME TAX DA TED 23.05.2015 AND DELETED THE ADDITION MADE ULS.2(22)(E) OF THE ACT, WHERE AS THE FACTS OF THE CASE ARE DISTINGUISHABLE. 4. THE LATEST DECISION OF THE HON'BLE HIGH COURT OF DELHI IN THE CASE OF VIKRAM KRISHNAN VSPR.CLT, IN ITA NO.21712019 DATED 06.03.2019, WHICH IS IN FAVOUR OF REVENUE AND THE FACTS ARE SIMILAR T O THE INSTANT CASE. 5. THE CIT(A) FAILED TO CONSIDER THE FACT THAT THER E IS NO NECESSITY TO PURCHASE A LAND AND BUILDING WHICH WAS ALREADY IN T HEIR POSSESSION. 6. THE CIT(A) FAILED TO CONSIDER THE FACT THAT THE AO HAS SPECIFICALLY STATED IN THE ASSESSMENT ORDER THAT THE DOCUMENTS P RODUCED IN SUPPORT OF HIS CLAIM, SHOWS LACK OF GENUINENESS. FURTHER TH E ASSESSEE FAILED TO GIVE THE ADEQUATE EVIDENCE AND COGENT, RELIABLE AND CREDIBLE EVIDENCES EVEN AT THE TIME OF APPELLATE PROCEEDINGS. :-4-: ITA NO.883/CHNY/2019 7. THE CIT(A) OUGHT TO HAVE APPRECIATED THE FACT TH E AGREEMENT TO SELL AND CANCELLATION OF SUCH DEED BY AGREEMENT FOR THE PURCHASE OF PROPERTY IS MERELY COVER UP AND A CAMOUFLAGE FOR GIVING ADVA NCE TO THE ASSESSEE BY THE COMPANY TO AVOID THE CONTRAVENTION OF THE PR OVISION OF SEC.2(22)(E) OF THE ACT. 8. THE CIT(A) ERRED IN DELETING THE ESTIMATED INCOM E FROM HOUSE PROPERTY AT RS.42,00,0001 BY HOLDING THAT THE COMPA NY WAS NOT AS A TENANT BUT ONLY AN INTENDED BUYER AND THEREFORE NO RENT IS PAYABLE BY THE COMPANY TO THE ASSESSEE NOR IS THE ASSESSEE ENTITLE D TO RECEIVE ANY RENT FROM THE COMPANY DURING THE SALE AGREEMENT PERIOD. 9.THE CIT(A) OUGHT TO HAVE APPRECIATED THE FACT THA T THE LEASE AGREEMENT CLEARLY SAYS THAT THE COMPANY SHOULD HAVE PAID RENTAL INCOME TO THE ASSESSEE FOR THE PREVIOUS YEARS. 10 FOR THESE AND OTHER GROUNDS THAT MAY BE ADDUCED AT THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE LEARNED COMMISSIONER OF LNCOME TAX (APPEALS) BE SET ASIDE AND THAT OF THE A SSESSING OFFICER BE RESTORED. THE LD DR PRESENTED THE CASE ON THE ABOVE LINES AND RELIED ON THE DECISIONS OF SUPREME COURT IN THE CASE OF SMT. TARU LATA SHYAM VS CIT 108 ITR 345 (SC) AND CIT VS. P.K. ABUBUCKER, 259 IT R 507 (MAD) AND PLEADED TO RESTORE THE ORDER OF THE AO . 3. PER CONTRA, THE LD AR SUBMITTED THAT THE ASSES SEE WAS THEN CARRYING ON BUSINESS AS MANUFACTURER AND EXPORTER O F GARMENTS INDIVIDUALLY UNDER THE NAME AND STYLE OF BNT CONNEC TIONS. HE IS A SUBSTANTIAL SHAREHOLDER OF M/S BNT CONNECTIONS IMPE X LTD. (COMPANY). THE COMPANY IS CARRYING ON BUSINESS AS MANUFACTURER AND EXPORTER OF READYMADE GARMENTS. DURING THE YEAR 200 5/06, THE :-5-: ITA NO.883/CHNY/2019 MANAGEMENT DECIDED TO CONSOLIDATE THE OPERATIONS AN D HENCE DECIDED TO MERGE THE GARMENT DIVISION OF M/S BNT CONNECTION S WITH M/S BNT CONNECTIONS IMPEX LTD AS A GOING CONCERN. AS A RESU LT, THEY ENTERED INTO MEMORANDUM OF UNDERSTANDING WITH BNT CONNECTIO NS DATED 07/07/2005 WHEREIN THE BUSINESS OF THE MANUFACTURER AND EXPORTER VIZ BNT CONNECTIONS WAS TAKEN OVER BY THE M/S BNT CONNE CTIONS LMPEX LTD AS A GOING CONCERN IN AS-IS-WHERE-IS CONDITION ALON G WITH ALL THE MOVABLE ASSETS, RIGHTS, LICENSES, EXPORT PERFORMANC E, ENTITLEMENTS ETC AS A GOING CONCERN WITH EFFECT FROM 1ST APRIL 2005 FOR A CONSIDERATION OF RS. 7,97,00,000/- THIS TAKE OVER WAS WITHOUT FACTOR Y LAND AND BUILDING AT THAT PARTICULAR POINT OF TIME.DURING THE LAST QU ARTER OF THE YEAR 2011/2012, THE MANAGEMENT FELT THAT IT WOULD BE IN THE LONG TERM INTEREST OF THE COMPANY TO ACQUIRE THE FACTORY LAND AND BUILDING OF BNT CONNECTIONS ALSO AND THAT IT WOULD ENABLE THE BNT C ONNECTIONS IMPEX LTD TO IMPROVE INFRASTRUCTURE IN THE PRODUCTION FAC ILITIES, IN THE SAID FACTORY BUILDING BY INSTALLATION OF ADDITIONAL NEW PLANT AND MACHINES OF LATEST STATE OF ART TECHNOLOGY TO IMPROVE THE CAPAC ITY, OUTPUT AND TURNOVER LEADING TO GROWTH AND DEVELOPMENT. ACCORDI NGLY, THE BNT CONNECTIONS IMPEX LTD OBTAINED THE APPROVAL OF BOAR D OF DIRECTORS AND ITS SHAREHOLDERS AND ENTERED INTO SALE AGREEMENT D ATED 31/03/2012 WITH BNT CONNECTIONS FOR PURCHASE OF THE SAID FACTO RY LAND AND BUILDING WHICH HAS THE BEST INFRASTRUCTURE FOR MANUFACTURE O F GARMENTS. IT WAS :-6-: ITA NO.883/CHNY/2019 ALSO AGREED BETWEEN THE PARTIES THAT THE SALE WOULD BE COMPLETED WITHIN A PERIOD OF THREE YEARS. THE MANAGEMENT FINA LISED THE SALE CONSIDERATION AT MARKET VALUE, CONSIDERING THE LOCA TIONS OF THE PROPERTIES, THE FACILITIES AVAILABLE, PREVAILING RA TES IN THE AREA AND FIXED THE SALE CONSIDERATION AS RS.10,00,00,000/- . FURTH ERANCE TO THE SALE AGREEMENT, THE COMPANY HAS PAID RS.RS. 3,76,00,000 FROM FY 2011-12 TO FY 2013-14. THE ASSESSEE HAS SHOWN THE AMOUNT R ECEIVED FROM THE COMPANY AS PROPERTY ADVANCE AND EVEN IN THE BOOKS OF THE COMPANY THE AMOUNT PAID BY THE COMPANY TO THE ASSESSEE IS S HOWN UNDER THE GROUP LOANS AND ADVANCES BEING PROPERTY PURCHASE. AS THE BNT CONNECTIONS IMPEX LTD FELT THAT IT WOULD NOT BE ABL E TO MAKE FULL PAYMENTS WITHIN THE TIME FRAME OF 3 YEARS AS ORIGIN ALLY AGREED, THE DURATION FOR COMPLETION OF THE SALE WAS EXTENDED FO R A FURTHER PERIOD OF ONE YEAR. ACCORDINGLY, DURING THE FINANCIAL YEAR 2 014-15 RELEVANT TO THE ASST YEAR 2015-16 A FURTHER PAYMENT OF RS 79,00,000 /- WAS ALSO MADE TOTALLING IN ALL A SUM OF RS 4,55,00,000/-. 3.1 WHEN BNT CONNECTIONS LMPEX LTD CONTEMPLATED ENT ERING INTO SALE AGREEMENT ON MARCH 2012 FOR PURCHASE OF THE PROPERT Y FROM BNT CONNECTIONS, THE BANKERS WERE TAKEN INTO CONFIDENCE AND EXPLAINED THE RATIONALE BEHIND THE INTENDED PURCHASE. THE BANKS W ELCOMED THE BNT CONNECTIONS IMPEX LTD. INITIATIVE AND WERE SUPPORTI VE OF COMPANYS :-7-: ITA NO.883/CHNY/2019 PLAN. HOWEVER, THEY ADVISED THE COMPANY TO USE THE PREMISES FOR MANUFACTURE AND EXPORT OF GARMENTS FOR COMPANY OPER ATIONS WITHOUT PAYING ANY RENT TO THE PROMOTERS PREMISES SINCE TH E COMPANY WAS BEEN PERMITTED BY THE BANKERS TO PAY PURCHASE CONSI DERATION DURING THE NEXT THREE YEARS IN ORDER TO STRENGTHEN AND TO EXPA ND THE COMPANY MANUFACTURING BASE. HENCE THE ASSESSEE BEING THE PR INCIPAL FOUNDER PROMOTER OF THE COMPANY, WENT AHEAD AND SIGNED THE AGREEMENT ON THE UNDERSTANDING THAT THE COMPANY WOULD HAVE THE R IGHT TO USE THE PREMISES FOR THE MANUFACTURE OF EXPORT GARMENTS WIT HOUT PAYMENT OF RENT FROM THE COMPANY TO THE ASSESSEE. THE COMPANY IS NOT ENTITLED FOR ANY INTEREST ON THE ADVANCES PAID UNDER THE SALE AG REEMENT IN LIEU OF NON-PAYMENT OF RENT DURING THE SALE AGREEMENT PERIO D. 3.2 AFTER THE FACTORY BUILDINGS SALE AGREEMENT WAS EXECUTED AND THE ADDITIONAL NEW PLANT AND MACHINERY WERE INSTALLED I N THE SAID ASSESSEES FACTORY BUILDINGS, THE COMPANYS OPERATING PROFITS STARTED TURNING POSITIVE FROM THE FINANCIAL YEAR 2013-14 AS AGAINST THE OPERATING LOSSES TILL THE FINANCIAL YEAR 2012-13. 3.3 HOWEVER AFTER THREE YEARS, DURING THE LAST QUAR TER OF THE FINANCIAL YEAR 2014-15 , THE MANAGEMENT FELT THAT THE COMPANY WAS VERY MUCH AFFECTED BY RISING COSTS, STAGNANT PRODUCTIVITY, IN TENSE COMPETITION FROM :-8-: ITA NO.883/CHNY/2019 THE GARMENT EXPORTERS OPERATING FROM THE NEIGHBOURI NG COUNTRIES ETC. THE MANAGEMENT REALIZED THE IMPERATIVE NEED TO IMPR OVE EFFICIENCY AND OUTPUT AND TO REDUCE COSTS AND OVERHEADS IN ORDER T O STAY COMPETITIVE FOR SURVIVAL AND GROWTH. MOREOVER, SKILLED LABOUR W AS BECOMING SCARCE WITHIN CHENNAI. THE MANAGEMENT REALIZED THAT IN ORD ER TO ATTRACT AND RETAIN SKILLED LABOUR, WHICH WAS IMPERATIVE TO IMPR OVE EFFICIENCY AND OUTPUT, AND TO REDUCE ITS OVERHEADS, IT WAS NECESSA RY TO SHIFT THE ENTIRE MANUFACTURING OPERATIONS OUT OF CHENNAI AND IN PART ICULAR TO A P . 3.4 FURTHER IN OVERALL INTEREST IN COMPANYS BUSINE SS OPERATIONS, THE MANAGEMENT CONSIDERED VARIOUS OPTIONS INCLUDING SHI FTING THE MANUFACTURING OPERATIONS TO ANDHRA PRADESH. THE STA TE OF ANDHRA PRADESH OFFERED VARIOUS ADVANTAGES ABOUT WHICH THE LD AR INVITED WERE OUR ATTENTION TO THE RELEVANT PORTION OF THE ORDER OF THE LD CIT(A) AND CONTINUED HER SUBMISSIONS STATING THAT BNT CONNECTI ONS IMPEX LTD, FURTHER PLANNED TO CONSOLIDATE ITS OPERATIONS AT ON E LOCATION TO HAVE A BETTER CONTROL OVER PRODUCTION AND PRODUCTIVITY, WH ICH WOULD RESULT IN A REDUCTION IN ITS OVERHEADS. THE MANAGEMENT ESTIMATE D THAT THE ABOVE ADVANTAGES WOULD RESULT IN A REDUCTION IN MANUFACTU RING COSTS SIGNIFICANTLY, BY 20-30%, THEREBY LEADING TO SUBSTA NTIAL COST SAVINGS FOR THE COMPANY. THEREFORE , THE COMPANY HAS STARTED LO OKING FOR PROPERTIES OUTSIDE CHENNAI PARTICULARLY IN A P FOR ITS BUSINESS NEEDS AND :-9-: ITA NO.883/CHNY/2019 ULTIMATELY FOUND A PROPERTY IN EKATALLUR VILLAGE, C HITTORE DISTRICT, AP, CHENNAI TO THIRUPATHI NATIONAL HIGHWAY APPROXIMATEL Y 80 KM FROM CHENNAI, WHICH WAS FOUND TO BE SUITABLE FOR SETTING UP A INTEGRATED READYMADE GARMENT MANUFACTURING UNIT AT ONE PLACE I NSTEAD OF HAVING FOUR MANUFACTURING UNITS IN CHENNAI. THE PROPERTY H AD ACCESS TO THE REQUIRED INFRASTRUCTURE AND THE SURROUNDING AREAS H AD READY AVAILABILITY OF LABOUR WHICH COULD BE TRAINED AND SUITABLY PLACE D IN THE FACTORY. THE MANAGEMENT ENTERED INTO NEGOTIATIONS WITH THE SELLE R AND FINALIZED THE PRICE OF THE PROPERTY AT RS.1.8 CRORES. DURING THE LAST QUARTER OF THE FINANCIAL YEAR 2014/15, THE COMPANY PAID AN ADVANCE FOR THE PURCHASE OF THIS PROPERTY. THE BALANCE AMOUNT WAS PAID DURIN G APRIL 2015 AND THE PROPERTY WAS REGISTERED IN THE NAME OF THE COMP ANY . THE COMPANY IS NOW IN AN ADVANCE STAGE OF PLANNING TO SET UP AN INTEGRATED FACTORY IN THE SAID LAND. AS THE COMPANY HAD ACQUIRED A BET TER AND MORE CONVENIENT PROPERTY AT ANDHRA PRADESH, IT HAS SIMUL TANEOUSLY DROPPED THE IDEA OF PURCHASING THE PROPERTY OF THE APPELLAN T DURING THE LAST QUARTER OF THE FINANCIAL YEAR 2014-15 AND ACCORDING LY THE AGREEMENT OF SALE WAS CANCELLED IN MARCH 2015 AND THE ENTIRE ADV ANCE OF RS. 4.55 CRORES WAS REPAID BY THE APPELLANT AT ONE STROKE ON 31 .03.2015. 3.5 THEREFORE, THE ASSESSEE HAS SUBMITTED THAT TH E TRANSACTION BY A COMPANY TO PURCHASE A PROPERTY FOR ITS BUSINESS PUR POSES IS A :-10-: ITA NO.883/CHNY/2019 TRANSACTION IN THE NATURE OF COMMERCIAL TRANSACTION AND THEREFORE THE ADVANCE FOR PURCHASE OF PROPERTY CANNOT BE CONSIDER ED AS DEEMED DIVIDEND U/S 2(22)(E) IN THE LIGHT OF THE ABOVE BIN DING CIRCULAR OF THE CBDT NO.19 OF 2017 DATED 12TH JUNE, 2017 WHEREIN TH E BOARD HAS CLARIFIED AS UNDER: IN VIEW OF THE ABOVE IT IS, A SETTLED POSITION THA T 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 ON THIS GROUND BY OFFICERS OF THE DEPARTMENT AND THOSE ALREADY FILED, IN COURTS TRIBU NALS MAY BE WITHDRAWN/NOT PRESSED UPON. AFTER CONSIDERING THE ASSESSEES EXPLANATION , MATE RIAL , CASE LAWS ETC , THE LD CIT(A) HELD THAT THE IMPUGNED ADVANCES FELL WITHIN THE MEANING OF COMMERCIAL AND BUSINESS PURPOSES AND CANNOT BE T REATED AS DEEMED DIVIDEND U/S 2(22)(E) OF THE ACT AND CORRECTLY DIRE CTED THE ASSESSING OFFICER TO THE DELETE THE ADDITION OF RS.2,31,00,00 0/- . 4. WITH REGARD TO THE ADDITION MADE UNDER THE HEAD HOUSE PROPERTY, THE LD. AR SUBMITTED THAT THE ASSESSEE HAS LET OUT THE PROPERTY TO THE COMPANY ONLY FROM 2014 AFTER CANCELLATION OF THE SA LE AGREEMENT AND AFTER RETURN OF THE ENTIRE ADVANCE PAID BY THE COMP ANY AND NOT EARLIER. THE ASSESSMENT YEAR INVOLVED IS 2014-15 AND DURING THIS YEAR THE PROPERTY WAS NOT LET OUT BY THE ASSESSEE TO THE COM PANY NOR ANY RENT WAS RECEIVED BY THE ASSESSEE FROM THE COMPANY. THE REFORE, ACCORDING :-11-: ITA NO.883/CHNY/2019 TO THE ASSESSEE, THE ASSESSING OFFICER WAS NOT JUST IFIED IN ASSESSING PROPERLY INCOME ON PRESUMPTIVE BASIS. THE LD. CIT (A) HELD THAT THE AO APPEARED TO HAVE OVERLOOKED THE FACT THAT THE AS SESSEE HAD AGREED TO SELL THE SAID PROPERTY TO THE COMPANY AND RECEIV ED ADVANCE FOR SALE OF THE PROPERTY ALSO FROM THE COMPANY. FURTHER, TH E ASSESSEE HAD ALREADY SOLD ALL HIS BUSINESS ASSETS INCLUDING THE PLANT AND MACHINERY TO THE COMPANY MUCH EARLIER AND THE COMPANY WAS USING THOSE ASSETS FOR ITS BUSINESS PURPOSES. THE COMPANY HAS PAID A TOTA L ADVANCE OF RS. 4.45 CR. FOR PURCHASE OF PROPERTY FROM THE ASSESSEE AND THE ASSESSEE ALLOWED THE COMPANY TO USE THE PREMISES ALSO AS HE HAS RECEIVED INTEREST FREE ADVANCE FROM THE COMPANY AND THERE WA S A CLAUSE IN SALE AGREEMENT TO RETURN THE ADVANCE MONEY WITHOUT INTER EST THEREON IN THE EVENT OF CANCELLATION OF THE IMPUGNED SALE AGREEMEN T DATED 31.03.2012. THEREFORE, IN HIS CONSIDERED VIEW, THE POSSESSION OF THE PROPERTY BY THE COMPANY WAS NOT AS A TENANT OF THE ASSESSEE BUT ONLY AS AN INTENDED BUYER OF THE PROPERTY AND THEREFORE NO RENT IS PAYABLE BY THE COMPANY TO THE ASSESSEE NOR IS THE ASSESSEE ENTITLED TO RECEIVE ANY RENT FROM THE COMPANY DURING THE SALE AGREEMENT PERIOD AND HENCE, DIRECTED THE AO TO DELETE THE ADDITION. THER EFORE, THE LD AR SUPPORTED AND RELIED ON THE ORDER OF THE LD. CIT(A) . :-12-: ITA NO.883/CHNY/2019 5. WE CONSIDERED THE RIVAL SUBMISSIONS. THE RELEVA NT PORTION OF THE ORDER OF THE LD. CIT(A) IS EXTRACTED AS UNDER: AT THIS JUNCTURE, ATTENTION IS DRAWN TO SECTION 2( 22)(E) OF THE INCOME TAX ACT 1961 AS FOLLOWS. THE SECTION 2(22)(E) IS READ AS FOLLOWS: ANY PAYMENT BY A COMPANY, NOT BEING A COMPANY IN WH ICH THE PUBLIC ARE SUBSTANTIALLY INTERESTED, OF ANY SUM BY WAY OF ADVA NCE OR LOAN TO A SHAREHOLDER , BEING A PERSON WHO IS BENEF ICIAL OWNER OF SHARES , HOLDING NOT LESS THAN 10% OF VOTING POWERS OR TO ANY CONCERN IN WHICH SUCH SHAREHOLDER IS A MEMBE R OR A PARTNER AND IN WHICH HE HAS A SUBSTANTIAL INTEREST, OR ANY PAYMENT BY ANY SUCH COMPANY ON BEHALF, OR ANY PAYMENT FOR THE INDIVIDUAL BENEFIT OF ANY SUCH SHAREHOLDER TO THE EXTENT TO WHICH THE COMPANY IN EITHER CASE POSSESSE S ACCUMULATED PROFITS. IF WE CAREFULLY GO THROUGH THE SECTION IT IS CLEAR THAT ANY PAYMENT MADE BY THE COMPANY TO A SHAREHOLDER HAVING MORE THAN 10% O F VOTING RIGHTS FOR THE INDIVIDUAL BENEFIT OF THE SHARE HOLDER THEN SUC H PAYMENTS ARE TO BE TREATED AS DEEMED DIVIDEND. HOWEVER IN THE ASSESSEE S CASE THE COMPANY M/S BNT CONNECTIONS LMPEX LIMITED HAS SUBSTANTIALLY BENEFITED BY PAYMENT OF PROPERTY PURCHASE ADVANCE OF A SUM OF RS .2,31,00,000/- IN THE ASST YEAR 2014-15. AFTER THE TAKEOVER OF THE PO SSESSION OF THE PREMISES BY THE COMPANY, THE COMPANY HAS INVESTED I N ADDITIONAL PLANT AND MACHINERY AND CONSEQUENTLY THE MANUFACTURING BA SE HAS EXPANDED OF THE COMPANY SUBSTANTIALLY, WHICH RESULTED IN OVERAL L INCREASE IN TURNOVER OF THE COMPANY FROM RS 38.00 CRORES TO RS 50.00 CRORES AND THE OPERATING PROFIT OF THE COMPANY ALSO SUBSTANTIALLY INCREASED FROM RS 2.6 CRORES TO RS 4.54 CRORES THIS IS EVIDENT FROM THE STATEMENT OF T URNOVER AND PROFIT OR LOSS SUBMITTED BY THE ASSESSEE IN THE WRITTEN SUBMI SSION. THEREFORE IT IS PROVED BEYOND REASONABLE DOUBT THAT THE PROPERTY AD VANCE OF RS 2.31 :-13-: ITA NO.883/CHNY/2019 CRORES PAID BY THE COMPANY TO THE APPELLANT IS PURE LY BUSINESS AND COMMERCIAL TRANSACTION AND HENCE THE PROVISIONS OF SECTION 2(22)(E) CANNOT BE INVOKED FOR SUCH BUSINESS AND COMMERCIAL TRANSACTION AS PER CBDT BOARD CIRCULAR NO 19/2017. EVEN OTHERWISE THIS PARTICULAR BUSINESS AND COMMERCIAL TRANSACTION IS BEYOND THE SCOPE OF S ECTION 2(22)(E) AS PER THE INCOME TAX ACT, 1961. AS A RESULT OF SUCH TRANS ACTION SUBSTANTIAL BENEFIT HAS ONLY ACCRUED TO THE COMPANY AND NOT TO THE INDIVIDUAL BENEFIT OF THE SHAREHOLDER ( APPELLANT). THE APPELLANT ALSO DREW MY ATTENTION TO THE FACT TH AT THE APPELLANT HAS RIGHT FROM THE INCEPTION OF THE COMPANY ALWAYS FUND ED THE COMPANY BY WAY OF UNSECURED LOAN WITHOUT INTEREST THEREON, WHE NEVER THE COMPANY REQUIRED FUNDS FOR ITS BUSINESS OPERATIONS. A STATE MENT OF UNSECURED LOAN GIVEN BY THE APPELLANT TO THE COMPANY WAS ENCLOSED FOR PERUSAL TO THIS EFFECT. THE APPELLANT ALSO ENCLOSED THE LETTER RECEIVED FRO M THE FEDERAL BANK ON 07/05/2014 WHEREIN THE BANK HAS CLEARLY STATED THAT WORKING CAPITAL FUNDS SHOULD NOT BE USED BY THE COMPANY FOR THE PROPERTY PURCHASE BUT MUST BE PAID OUT OF OTHER ACCRUALS I.E. RENTAL INCOME AND T HE COMPANY SHOULD NOT PAY RENT TO THE ASSESSEE FOR USING THE FACTORY PREM ISES. FURTHER THE PROPERTY TO BE PURCHASED SHOULD BE USED FOR MANUFAC TURE AND EXPORT OF READYMADE GARMENTS. IN THIS REGARD, COPIES OF BANK STATEMENT WERE SUBMITTED WHEREIN THE AMOUNT PAID BY THE COMPANY TO THE APPELLANT HAS GONE OUT OF RENTAL INCOME ACCOUNT OPERATED IN IDBI BANK. HENCE EVEN FROM THE ABOVE LETTER IT IS VERY CLEAR THAT THE TRA NSACTION IS FOR BUSINESS AND COMMERCIAL PURPOSE AND THERE IS NO BENEFIT ACCR UING TO THE ASSESSEE FROM SUCH TRANSACTION. MY ATTENTION WAS ALSO DRAWN TO THE JURISDICTIONAL T RIBUNALS DECISION IN THE CASE OF G. SREEVIDYA, CHENNAI VS DEPARTMENT OF INCO ME-TAX DATED 23.05.2015, THE RELEVANT EXTRACTS OF WHICH IS REPRO DUCED BELOW: THE CASE OF THE ASSESSEE IS SQUARELY COVERED BY DI VISION BENCH JUDGMENT OF THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF P RADIP KUMAR MA/HOTRA (SUPRA), WHEREIN THE FACTS WERE SIMILAR TO THE FACT S OF THE INSTANT CASE. IN PRADIP KUMARS CASE ASSESSEE HAD SUBSTANTIAL HOLDIN G IN A PRIVATE COMPANY. THE ASSESSEE PERMITTED HIS IMMOVABLE PROPE RTY TO BE MORTGAGED TO THE BANK FOR ENABLING THE COMPANY TO T AKE THE BENEFIT OF :-14-: ITA NO.883/CHNY/2019 LOAN. THE BOARD OF DIRECTORS OF THE COMPANY PASSED A RESOLUTION TO OBTAIN INTEREST FREE DEPOSIT UPTO 50 LAKHS AS AND WHEN REQ UIRED. THE ASSESSEE OBTAINED FROM THE COMPANY A SUM OF 20,75,000/- BY W AY OF SECURITY DEPOSIT. OUT OF THIS AMOUNT, A SUM OF 20 LAKHS WAS RETURNED BY THE ASSESSEE TO THE COMPANY. THE ASSESSING OFFICER ADDE D THE SUM OF 20,75,000/- AS DEEMED DIVIDEND. THE HONBLE HIGH CO URT WHILE ALLOWING THE APPEAL OF ASSESSEE HELD THAT FOR RETAINING THE BENEFIT OF LOAN AVAILED OF FROM THE BANK, IF DECISION WAS TAKEN TO GIVE ADVANC E TO THE ASESSEE SUCH DECISION WAS NOT TO GIVE GRATUITOUS ADVANCE TO ITS SHAREHOLDER BUT TO PROTECT THE BUSINESS INTEREST OF THE COMPANY. THE S UM OF 20,75,000/- COULD NOT BE TREATED AS DEEMED DIVIDEND. THE DIVISI ON BENCH OF THE HONBLE CALCUTTA HIGH COURT FOLLOWED THE DECISION O F THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. CREATIVE DYEING & PRINTING P. LTD. REPORTED AS 318 ITR 476(DEL). IN THE INSTANT CASE A LSO THE ASSESSEE WAS ALLOWED TO WITHDRAW FUNDS FROM THE COMPANY AS PER R EQUIREMENT FOR PERSONAL PURPOSES AGAINST THE PERSONAL GUARANTEE AN D THE COLLATERAL SECURITY GIVEN BY HER TO FACILITATE HER AVAILING OF CREDIT FACILITY OF THE COMPANY. IT IS A WELL SETTLED LAW THAT LOAN OR ADVANCE GIVEN TO A SHAREHOLDER BY A COMPANY IN WHICH PUBLIC IS NOT SUBSTANTIALLY INTERE STED AND WHICH HAD ACCUMULATED PROFITS, THE AMOUNT ADVANCED AS LOAN TO SUCH SHAREHOLDER IS DEEMED TO BE DIVIDEND AS PER THE PROVISIONS OF SECT ION 2(22)(E) OF THE ACT. HOWEVER, THE FACTS AND CIRCUMSTANCES OF EACH CASE H AVE TO BE SCRUTINIZED BEFORE APPLYING THE RATIO OF THE CASES HOLDING ABOV E WELL SETTLED LAW. IN THE FACTS AND CIRCUMSTANCES OF THE INSTANT CASE, JU DGEMENTS RELIED UPON BY THE DR IN THE CASES OF SARADA P.(SUPRA), P.K.ABU BUCKER (SUPRA) AND TRARULATA SHYAM (SUPRA) ARE NOT APPLICABLE. THE COMMISSIONER OF INCOME TAX (APPEALS) VIDE ORDER DATED 6.4.2011 HAS RIGHTLY DELETED THE ADDITION MADE ON ACCOUNT OF DE EMED DIVIDEND BY THE ASSESSING OFFICER. WE DO NOT FIND ANY INFIRMITY IN THE ORDER PASSED BY THE COMMISSIONER OF INCOME-TAX(APPEALS). IN VIEW OF AFO RESAID FINDINGS, THE APPEAL OF THE REVENUE FALLS AND THE SAME IS DISMISS ED BEING DEVOID OF ANY MERIT. THEREFORE THE ASSESSING OFFICERS REJECTION OF THE SUBMISSION OF THE APPELLANT THAT THE PROPERTY SALE ADVANCE WAS FOR PU RCHASE OF PROPERTY FOR :-15-: ITA NO.883/CHNY/2019 THE USE OF THE COMPANY FOR ITS BUSINESS WAS ON AN I NCORRECT FOOTING. THEREFORE, IT IS HELD THAT SUCH ADVANCES FALLS WITH IN THE MEANING OF COMMERCIAL AND BUSINESS PURPOSES AND CANNOT BE TREA TED AS DEEMED DIVIDEND U/S 2(22)(E) OF THE ACT. THE ASSESSING OFFICER IS DIRECTED THE DELETE THE AD DITION OF RS.2,31,00,000/- MADE UNDER THIS HEAD. THIS GROUND IS ALLOWED. FROM THE ABOVE, IT IS CLEAR THAT THE LD. CIT(A) HA S EXAMINED THENATURE AND SCOPE OF THE TRANSACTIONS AND FOUND THAT THE IM PUGNED TRANSACTIONS ARE TOWARDS BUSINESS AND COMMERCIAL PURPOSE AND THE RE IS NO BENEFIT ACCRUING TO THE ASSESSEE FROM SUCH TRANSACTION. TH US, ON THE ABOVE FACTS AND CIRCUMSTANCES , THE ASSESSEE HAS CLEARLY ESTABLISHED THAT THE IMPUGNED TRANSACTIONS ARE NOT FOLLOWING WITHIN THE SCOPE OF SECTION 2(22)(E). THE REVENUE IS NOT ABLE TO DISLODGE SUCH FINDINGS RECORDED BY THE LD. CIT(A) BY RELEVANT MATERIAL. THEREFORE, THE CASE LAWS RELIED ON BY THE LD DR IS NOT OF ANY HELP TO THE REVENUE O N THE ABOVE FACTS AND CIRCUMSTANCES OF THIS CASE. HENCE, WE DO NOT FI ND ANY REASON TO INTERFERE WITH THE ORDER OF THE LD. CIT(A). THEREF ORE, WE DISMISS THE REVENUES CORRESPONDING GROUNDS OF APPEAL. 6. WITH REGARD TO THE ADDITION MADE UNDER THE HEAD HOUSE PROPERTY, IT IS CLEAR THAT THE ASSESSEE IS OWNER OF THE LAND AND BUILDING. IT WAS USED BY THE COMPANY TOWARDS ITS BUSINESS PURPOSES. THEREFORE, THE ANNUAL VALUE OF PROPERTY, I.E. THE INCOME ARISING FROM THE HOUSE PROPERTY, HAS TO BE ASSESSED TO TAX U/S.S 22 TO 27 OF THE INCOME TAX :-16-: ITA NO.883/CHNY/2019 ACT. THE AO HAS BASED THE RENTAL INCOME RECEIVED B Y THE ASSESSEE IN THE IMMEDIATELY SUCCEEDING YEAR, AS THE SUM FOR WHI CH THE PROPERTY MIGHT REASONABLY BE EXPECTED TO LET FROM YEAR TO YE AR AND PARTICULARLY FOR THIS ASSESSMENT YEAR. ON WHICH, THE ASSESSEE HAS NOT PLACED ANY MATERIAL TO HOLD THAT THE AMOUNT ASSESSED BY THE AO IS UNREASONABLE. THEREFORE, WE UPHOLD THE ORDER OF THE AO. TO THIS EXTENT, THE REVENUES APPEAL IS ALLOWED. IN THE RESULT, THE RE VENUES APPEAL IS PARTLY ALLOWED. 7. IN THE RESULT, THE REVENUES APPEAL IS PARTLY AL LOWED. ORDER PRONOUNCED ON 25 TH FEBRUARY, 2020 AT CHENNAI. SD/- ( . . . ) (N.R.S. GANESAN) /JUDICIAL MEMBER SD/- ( ! ) (S. JAYARAMAN) ' /ACCOUNTANT MEMBER /CHENNAI, . /DATED: 25 TH FEBRUARY, 2020 JPV &'*/010-* /COPY TO: 1. $% / APPELLANT 2. '#$% /RESPONDENT 3. ) 2* ) ( /CIT(A) 4. ) 2* /CIT 5. 03'* /DR 6. 456 /GF