ACIT, New Delhi v. M/s Delhi Apartments Pvt. Ltd., New Delhi

ITA 1948/DEL/2011 | 2007-2008
Pronouncement Date: 31-10-2013 | Result: Dismissed

Appeal Details

RSA Number 194820114 RSA 2011
Bench Delhi
Appeal Number ITA 1948/DEL/2011
Duration Of Justice 2 year(s) 6 month(s) 10 day(s)
Appellant ACIT, New Delhi
Respondent M/s Delhi Apartments Pvt. Ltd., New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 31-10-2013
Appeal Filed By Department
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 31-10-2013
Assessment Year 2007-2008
Appeal Filed On 20-04-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: B NEW DELHI BEFORE SHRI R. S. SYAL ACCOUNTANT MEMBER AND SHRI RAJPAL YADAV JUDICIAL MEMBER I.T.A .NO.-1948/DEL/2011 (ASSESSMENT YEAR-2007-08) ACIT VS. M/S DELHI APARTMENTS P. CIRCLE-10(1) LTD. WZ-6 LAJWANTI NEW DELHI. GARDEN JAIL ROAD NEW DELHI.-46 PAN: AACD0325J (APPELLANT) (RESPONDENT) REVENUE BY:- SMT. NIDDI SRIVASTAVA SR. DR. ASSESSEE BY:- SH. ANOOP SHARMA & SH. MANU K. GIRI ADV. ORDER PER R. S. SYAL AM : THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT (A) ON 29.12.2010 IN RELATION TO THE ASSESSMENT YEAR 2007-08. 2 2. REVISED GROUNDS HAVE BEEN FILED BY THE REVENUE MAKING CERTAIN CORRECTIONS IN THE ORIGINAL GROUNDS AS PER FORM NO. 36. 3. FIRST GROUND IS AGAINST THE TREATMENT OF INCOME FROM SALE OF LAND AMOUNTING TO RS.20.00 LAC AS LONG TERM CAP ITAL GAIN AS AGAINST THE AO TREATING IT AS `INCOME FROM OTHER SOURCES. BRIEFLY STATED THE FACTS OF THIS GROUND ARE THAT TH E ASSESSEE IS ENGAGED IN THE BUSINESS OF REAL ESTATE WORKING AS BUILDER AND DEVELOPER. APART FROM BUSINESS INCOME OF RS.15.89 C RORE THE ASSESSEE DECLARED CAPITAL GAIN OF RS.20 LAC. ON BEI NG CALLED UPON TO SUBSTANTIATE THE NATURE OF CAPITAL GAIN TH E ASSESSEE SUBMITTED THAT AGRICULTURAL OF LAND ADMEASURING 4.1 3 B/B PURCHASED ON 20.04.92 WAS SOLD TO SH. NARESH AGARW AL ON 21.07.2000. THE SAID LAND WAS SHOWN AS FIXED ASSETS AND RESULTANTLY THE CAPITAL GAIN OF RS.6 24 390/- WAS S HOWN IN THE PREVIOUS YEAR RELEVANT TO THE AY 2001-02. A SMALL PORTION OF 3 0.18 BISWAS LEFT UNSOLD OUT OF THE SAID LAND WAS N OW AVAILABLE WITH THE COMPANY WHICH WAS SOLD IN THE RELEVANT YEA R FOR A SUM OF RS.20 LAC. AS THE INCOME FROM SALE OF LAND W AS CHARGED TO TAX UNDER THE CAPITAL GAINS FOR THE AY 2001-02 THE ASSESSEE CONTENDED THAT SIMILAR TREATMENT SHOULD BE GIVEN TO THE PRESENT INCOME OF RS.20 LAC ALSO ARISING FROM T HE SALE OF THE SAME LAND. THE AO NEGATIVED THIS CONTENTION AND TAXED THE AMOUNT UNDER THE HEAD `INCOME FROM OTHER SOURCES . THE LD. CIT (A) CONCURRED WITH THE SUBMISSIONS ADVANCED ON BEHALF OF THE ASSESSEE AND ALLOWED THE AMOUNT TO BE TAXED AS LONG TERM CAPITAL GAIN. THE REVENUE IS IN APPEAL BEFORE US. 4. HAVING HEARD THE RIVAL SUBMISSIONS AND PERUSED T HE RELEVANT MATERIAL ON RECORD IT IS FOUND AS AN ADMI TTED POSITION THAT THE SUM OF RS.20 LAC WAS RECEIVED BY THE ASSES SEE ON ACCOUNT OF SALE OF SMALL PORITION OF 0.18 BISWAS OF LAND WHICH WAS EARLIER SOLD IN THE FINANCIAL YEAR 2000-01. THE RE IS NO 4 QUARREL OVER THE NATURE OF INCOME ARISING FROM THE SALE OF THIS SMALL PART OF THE LAND. WHEN THE ENTIRE LAND WAS SO LD IN SUCH EARLIER YEAR AND THE AMOUNT OF GAIN RESULTING FROM SUCH TRANSFER WAS DECLARED AND ACCEPTED AS CAPITAL GAIN S WE FAIL TO APPRECIATE AS TO HOW THE NATURE OF INCOME ARISIN G FROM THE SALE OF A LEFT OVER SMALL FRACTION OF THE SAID LAND CAN BE TREATED DIFFERENTLY. WE THEREFORE APPROVE THE VIEW TAKEN B Y THE LD. CIT (A) IN CONSIDERING THE AMOUNT AS LONG TERM CAP ITAL GAIN. THIS GROUND IS NOT ALLOWED. 5. GROUND NO. 2 OF THE APPEAL IS AGAINST THE DELETI ON OF DISALLOWANCE OF RS. 1 LAC OUT OF PRIOR PERIOD EXPEN SES. THE ASSESSEE PAID A SUM OF RS.1 LAC TO M/S GROUP INTERIO R ON 19.01.2006 TOWARDS ARCHITECTURAL SERVICES AFTER DE DUCTION OF TAX AT SOURCE. FINAL BILL WAS RAISED ON 14.04.2006 FOR RS.1 04 590/- WHICH WAS SETTLED AT RS.1 LAC. THE AO TREATED SUCH AMOUNT AS PRIOR PERIOD EXPENSE ON THE PREMISE THAT THE 5 AMOUNT WAS PAID ON 19.01.2006 RELEVANT TO THE PRECE DING ASSESSMENT YEAR. HE THEREFORE MADE DISALLOWANCE FO R THE SAME. THE LD. CIT (A) GOT CONVINCED WITH THE ASSESS EES SUBMISSIONS AND DELETED THE ADDITION. 6. HAVING HEARD BOTH THE SIDES ON ISSUE AND PERUSED THE RELEVANT MATERIAL ON RECORD IT IS OBSERVED THAT M/S GROUP INTERIOR ISSUED BILL DATED 14.4.2006 FOR A SUM OF R S.1 04 590/- WHICH WAS SETTLED BY THE ASSESSEE FOR A SUM OF RS.1 LAC. THE PAYMENT MADE TO THE PARTY ON 19.01.2006 WAS SIMPLY IN THE NATURE OF ADVANCE FOR WHICH THE SERVICES WERE RENDE RED AND THE BILL WAS RAISED IN THE PREVIOUS YEAR RELEVANT TO TH E ASSESSMENT YEAR UNDER CONSIDERATION. SINCE THE ASSESSEE IS A C OMPANY FOLLOWING MERCANTILE SYSTEM OF ACCOUNT THE EXPENDI TURE WOULD CALL FOR DEDUCTION AT THE TIME WHEN THE LIABILITY I S FINALLY SETTLED AND NOT WHEN THE AMOUNT WAS PAID IN ADVANCE. THE RE ASON FOR DEDUCTION OF TAX AT SOURCE AT THE TIME OF PAYMENT I S THE 6 APPLICABILITY OF PROVISIONS OF SECTION 194J WHICH P ROVIDE FOR DEDUCTION OF TAX AT SOURCE EITHER AT THE TIME OF CR EDIT OF THE SUM TO THE ACCOUNT OF THE PAYEE OR AT THE TIME OF PAYME NT THERE OF WHICHEVER IS EARLIER. IN OUR CONSIDERED OPINION THE LD. CIT (A) WAS A RIGHT IN ALLOWING DEDUCTION FOR THIS AMOUNT THIS GROUND IS NOT ALLOWED. 7. LAST GROUND IS AGAINST THE DELETION OF ADDITION OF RS.15 64 778/- AS DEEMED DIVIDEND U/S 2(22) (E) OF THE ACT. BRIEFLY STATED THE FACTS OF THIS GROUND ARE THAT TH E ASSESSEE COMPANY WAS HAVING 3 SHAREHOLDERS VIZ. SH. DEEPAK BHARDWAJ SMT. RAMESH KUMARI BHARDWAJ AND M/S DEEPA K BHARDWAJ & SONS (HUF). ON GOING THROUGH THE DETAIL S IT WAS NOTICED BY THE AO THAT THE ASSESSEE COMPANY HAS MAD E/ RECEIVED ADVANCES TO THE FOLLOWING PERSONS: 7 TABLE-A NAME OF ASSOCIATES AMOUNT ACCEPTED RELATION WITH COMPANY M/S HUTMENTS LAND DEVELOPERS PVT LTD 5 60 00 000 DEEPAK BHARDWAJ HOLDS (RESERVES AS ON 31.03.06 RS.6 98 576/-=) 50% SH ARES (RESERVES AS ON 30.12.06 RS.13 64 778/-=) M/S BRB CONSTRUCTIONS P LTD 2 00 000 DEEPAK BHA RDWAJ HOLDS (RESERVES 33 67 365) 40% SHARES TABLE-B NAME OF ASSOCIATES AMOUNT ADVANCED RELATION WITH COMPANY M/S DEEPAK RESORTS & HOTELS (P) LTD. RS.1 00 00 000 /-= DEEPAK BHARDWAJ HOLDS +RS.1 02 00 000/- 35.71% SHARES M/S JJV MARKET & HOTELS RS.65 00 000/-= DEEPAK BHARDWAJ HOLDS 42.5% SHARES 8. THE AO HELD THE AMOUNT AS PER TABLE A AND TABLE B ABOVE TO BE DEEMED DIVIDEND U/S 2(22)(E) OF THE ACT SUB JECT TO THE AVAILABILITY OF ACCUMULATED PROFITS. THIS RESULTED INTO ADDITION OF RS.15 64 778/-. THE LD. CIT (A) ORDERED FOR THE DELETION OF ADDITION. 8 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. THE HONBLE DELHI HI GH COURT IN CIT VS. NAVYUG PROMOTERS (P) LTD. (2011) 203 TAXMA N 618 (DEL) HAS HELD THAT : ` BORROWER MUST HOLD SHARES IN LENDING COMPANYAN ASSESSEE WHO IS NOT A SHAREHOLDER OF THE COMPANY FROM WHICH HE RECEIVED A LOAN OR AN ADVANC E CANNOT BE TREATED AS BEING COVERED BY THE DEFINITION OF TH E WORD 'DIVIDEND' AS PROVIDED IN S. 2(22)(E). IT IS FURTHER PERTINENT TO NOTE THAT THE SPECIAL BENCH OF THE TRIBUNAL IN ACIT VS. BHAUMIK COLOUR P. LTD. (2009) 27 SOT 270 (MUM)(SB) WHICH HAS SINCE BEEN APPROVED BY THE HONBLE BOMBAY HC IN CIT VS. UNIVERSAL MEDICARE (P) LTD. (2010) 324 ITR 263 (BOM) HAS HELD THAT : `DEEMED DIVIDEND CAN BE ASSESSED ONLY IN THE HANDS OF A PERSON WHO IS A SHAREHOLDER OF TH E LENDER COMPANY AND NOT IN THE HANDS OF THE BORROWING CONCE RN IN WHICH SUCH SHAREHOLDER IS MEMBER OR PARTNER HAVING SUBSTANTIAL INTEREST.. INTENTION BEHIND THE PROVISI ONS OF S. 2(22)(E) IS TO TAX DIVIDEND IN THE HANDS OF SHAREHO LDER. ADVERTING TO THE FACTS OF THE INSTANT CASE IT CAN BE SEEN FROM TABLE A AS EXTRACTED ABOVE FROM THE ASSESSMENT OR DER THAT 9 THE ASSESSEE COMPANY IS NOT A SHAREHOLDER IN THE CO MPANIES ADVANCING LOANS TO IT. RATHER THE SHAREHOLDERS OF THE ASSESSEE ARE SHAREHOLDERS OF SUCH COMPANIES. IN THAT VIEW O F THE MATTER AND RESPECTFULLY FOLLOWING THE RATIO OF THE ABOVE P RECEDENTS IT IS MANIFEST THAT THERE IS NO QUESTION OF ASSESSING DEEMED DIVIDEND IN THE HANDS OF THE ASSESSEE. IN SO FAR A S THE CONTENTS OF TABLE B REPRODUCED ABOVE FROM THE ASSESSMENT ORDER ARE CONCERNED WE FIND THAT THESE REPRESENT `AMOUNT ADV ANCED. IF THESE ARE THE CONCERNS TO WHICH THE ASSESSEE HAS AD VANCED LOAN/ADVANCES THE PROVISIONS OF SECTION 2(22)(E) W OULD LACK APPLICATION AS THIS SECTION APPLIES TO LOANS RECEIV ED BY THE ASSESSEE WHICH IS TREATED AS DEEMED DIVIDEND. PAYME NT OF LOAN/ADVANCE IS NOT HIT BY THIS SECTION. EVEN OTHER WISE IT IS PATENT THAT THE ASSESSEE COMPANYS SHAREHOLDERS ARE SHAREHOLDERS OF SUCH CONCERNS AND IT IS NOT THE ASS ESSEE WHICH IS A SHAREHOLDER IN SUCH COMPANIES. THIS ALSO OBLIT ERATES THE APPLICATION OF SECTION 2(22)(E). WE THEREFORE UPH OLD THE IMPUGNED ORDER. THIS GROUND IS NOT ALLOWED. 10 10. IN THE RESULT THE APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 31/10/2013. SD/- SD/- ( RAJPAL YADAV ) (R. S. SYAL) JUDICIAL MEMBER ACCOUNTANT ME MBER DATED: 31/10/2013 *AK VERMA* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTR DATE INITIAL 1. DRAFT DICTATED ON 29-10-2013 PS 2. DRAFT PLACED BEFORE AUTHOR 29-10-2013 PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 29-10-2013 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS PS/PS 6. KEPT FOR PRONOUNCEMENT ON PS 7. FILE SENT TO THE BENCH CLERK PS 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER. *