Where the amount was advanced due to the business exigencies as per agreement executed between the parties, it cannot be considered as deemed dividend

International Land Development (P) Ltd Vs ITO (ITAT Delhi)- The learned CIT(A) has vacated the demand with regard to payment made to Goldman Malls Pvt.Ltd. for the reason that the payments were made for business exigencies as well as Goldman Malls Pvt.Ltd. is not shareholder of the assessee company. We have perused the memorandum of understanding executed on 1.12.2006 between the assessee company and Goldman Malls Pvt.Ltd. placed at pages 255 to 260 of the paper book filed by the assessee. Under this agreement, the assessee had agreed to advance upto 5 crores to Goldman Malls Pvt.Ltd. to enable it to acquire the title and ownership rights of the land for the projects and to incur other costs and expenses in relation thereto. This agreement was produced before the CIT(A) and was sent to the AO for his comments. Though the AO stated in the remand report that the assessee has filed the copy of the agreements and memorandum of understanding executed by the parties and other connected papers, he has not given any adverse comment on this except reiterating that AO has made the addition within the ambit of Section 2(22)(e) of the Act. Moreover, Goldman Malls Pvt.Ltd. is not a shareholder of the assessee company. Therefore, the learned CIT(A) has rightly vacated the demand in respect of the payment made to Goldman Malls Pvt.Ltd.

IN THE INCOME TAX APPELLATE TRIBUNAL

DELHI BENCH ‘C’ : NEW DELHI

ITA Nos. 3390/Del/2010 & 3391/Del/2010

Assessment Years : 2005- 06 & 2007-08

Income Tax Officer, Vs. M/s International Land Development (P) Ltd.,

Cross-Objection Nos.218/Del/2010 & 219/Del/2010

Assessment Years : 2005-06 & 2007-08

M/s International Land Development (P) Ltd., Vs. Income Tax Officer,

ORDER