Skip to main content

Amount given as Security for Purchase of Flat cannot be treated as ‘Deemed Dividend

In the case of DCIT vs. Smt. Sriram Satyavathi, Visakhapatnam bench of Income Tax Appellate Tribunal (ITA) recently held that amount given as security for purchase of flat cannot be treated as ‘deemed dividend’ for the purpose of Section 2(22)(e) of the Income Tax Act, 1961. 

Assessee in the present case is an individual duly filed his return of income for the relevant assessment year.  During the course of assessment proceedings the Assessing Officer (AO) has conducted a search under Section 132 of the Income Tax Act 1961. 

It was found during the course of search that a promissory note executed in favour of the assessee which representing Vijetha Foundation and Constructions Pvt. Ltd.for a sum of Rs.35 lakhs. However the assessee was called for explanation as to why the loan given to M/s. Vijetha Constructions should not be brought to tax under section 2(22)(e) of the Act in the hands of the assessee. In response the assessee explained that M/s. First Tek Pvt. Ltd. had advanced a sum of Rs. 35 lakhs to M/s. Vijetha Foundation and Constructions Pvt. Ltd. for purchase of property and as a precautionary measure, a pro note was executed in favour of the assessee by M/s. Vijetha Constructions and no monetary transaction was exchanged between the assessee and M/s. Vijetha Constructions in respect of Rs. 35 lakhs. 

But the AO refused to accept assessee’s submission and he was of the opinion that the said sum required to be brought to tax as deemed dividend under section 2(22)(e) of the Act, and accordingly completed assessment by making an addition of Rs.35 lakhs in the hands of the assessee. On appeal, CIT(A) deleted the addition made by the AO by holding that the aforementioned transactions were purely sale and purchase transactions but not the finance transactions or any loan to hold the payment as a deemed dividend under section 2(22)(e) of the Act. Aggrieved by the order passed by the authority revenue was on appeal before the tribunal.

Article referred: http://www.taxscan.in/amount-given-security-purchase-flat-treated-deemed-dividend-itat/16647/

Comments

Post a Comment

Most viewed this month

Valuation Report of Jewellery once made is effective for Four Assessment Years

The division Bench of the Delhi High Court in Pr.Commissioner of Wealth Tax vs. Raghu Hari Dalmia held that a valuation report made by a registered valuer once adopted shall be in effect for four assessment years unless an event has occurred whereby the value is increased or decreased. The High Court made it clear that the event of “search” under Section 132 of the Income Tax Act, 1961 cannot compel the assessee to undertake a fresh valuation.
2 comments
Read more

The recovery of vehicles by the financier not an offence - SC

Special Leave Petition (Crl.) No. 8907  of 2009 Anup Sarmah (Petitioner) Vs Bhola Nath Sharma & Ors.(Respondents) The petitioner submitted that  respondents-financer had forcibly taken away the vehicle financed by them and  illegally deprived the petitioner from its lawful possession  and  thus,  committed  a crime. The complaint filed by the petitioner had been  entertained  by  the Judicial Magistrate (Ist Class), Gauhati (Assam) in Complaint Case  No.  608 of 2009, even directing the interim custody of the vehicle (Maruti  Zen)  be given to the petitioner vide order dated  17.3.2009.  The respondent on approaching the Guwahati High  Court against this order, the hon'ble court squashed the criminal  proceedings  pending   before  the  learned Magistrate. After hearing both sides, the Hon'ble Supreme Court decided on 30th...
7 comments
Read more

Mere Agreement To Sell The Leased Property To Tenant Would Not Terminate Landlord-Tenant Relationship

In CIVIL APPEAL Nos. 1237­1238 OF 2019, Dr. H.K. Sharma vs Shri Ram Lal, the tenant had objected against the eviction suit filed by the landlord, claiming that the landlord-tenant relationship between them had ceased to exist by virtue of an agreement for sale entered between them and that he has already paid some money in advance based on the agreement. The tenant contented as the landlord-tenant relationship did not exist, the landlord cannot evict him. The matter went through various forums and finally landed before the Supreme Court in appeal. The Supreme Court referring to the judgment in Shah Mathuradas Maganlal & Co. vs. Nagappa Shankarappa Malage & Ors., held that in the instant case the lease agreement included no clauses on the fate of the tenancy. A fortiori, the parties did not intend to surrender the tenancy rights despite entering into an agreement of sale of the tenanted property. In other words, if the parties really intended to surrender their tenancy ...
2 comments
Read more