Advance to Directors for Land Purchase cannot be treated as Deemed Dividend

D.L.V. Sridhar Vs. DCIT (ITAT Visakhapatnam)

In this case, the assessee is the Managing Director of the company M/s. STC Transports Private Limited and having controlling shares in the company. The assessee has entered into an agreement with the assessee company for sale of his land ad measuring 1504.81 sq.yds. site at Enikepadu village in R.S. No. 168/1 & 168/2 for a consideration of Rs. 1.50 crores and received the sums of Rs. 1.49 crores till the end of the financial year and the registration was pending as at the end of the year. However, subsequently the land was got registered in favour of the company and the company was given possession of the land. In the intervening period, the assessee has offered its land to the company’s loans as a security for the amounts advanced by the Axis bank. Though Ld. CIT(A) relied on various decisions cited (supra), the facts of the said decisions are distinguishable as submitted by the Ld. A.R. and not applicable in the assessee’s case. Though Ld. CIT(A) stated that as per the sale agreement, there was a discrepancy with regard to the advance payment of Rs. 4.95 lakhs. The same was clarified by the Ld. A.R. stating that a sum of Rs. 2.20 lakhs was paid in cash and the balance amount was paid by cheques. Ultimately, the land was registered in the name of the company and transferred to the assessee. Since the land was transferred, we do not find any reason to suspect the genuineness of the transaction and to support the argument of the Ld. D.R. as colourable device. The Ld. D.R. did not place any evidence to show that the transaction is not genuine or bogus. Since the evidences establish that the advance was given for purchase of the land, we do not find any reason to sustain the order of the Ld. CIT(A), accordingly we set aside the orders of the lower authorities and allow the appeal of the assessee.