Case Law Details
DCIT Vs Platinum Towers Pvt. Ltd. (ITAT Delhi)
In a recent case, DCIT Vs. Platinum Towers Pvt. Ltd. (ITAT Delhi), the Income Tax Appellate Tribunal (ITAT) Delhi addressed the issue of whether personal expenses incurred by a company on behalf of its directors could be considered as loans to the directors, thereby violating Section 269SS of the Income Tax Act. The case involved a search and seizure operation conducted on M/s Spaze Towers Pvt. Ltd., which led to proceedings against Platinum Towers Pvt. Ltd. for allegedly accepting loans from Spaze Towers Pvt. Ltd.
The Assessing Officer treated the expenses incurred by Spaze Towers Pvt. Ltd. on Platinum Farm House, which included expenses for interior, furniture, and fixtures, as income of Platinum Towers Pvt. Ltd. The Assessing Officer argued that by accepting these expenses, Platinum Towers Pvt. Ltd. had violated the provisions of Section 269SS, which prohibits accepting loans or deposits in cash exceeding a specified limit.
However, the ITAT Delhi, relying on previous decisions and the findings of the Settlement Commission, held that the personal expenses incurred by Spaze Towers Pvt. Ltd. on behalf of its directors could not be construed as loans or deposits. The Settlement Commission had accepted that these expenses were incurred by Spaze Towers Pvt. Ltd. and were related to personal needs of the directors, which included ceremonial functions and farm house construction.
The tribunal emphasized that there was no lender-borrower relationship between Spaze Towers Pvt. Ltd. and the directors of Platinum Towers Pvt. Ltd. The directors had merely acknowledged the expenses as a liability, but this did not transform the transactions into loans or deposits. Additionally, the tribunal noted that the taxes on these expenses had been duly paid by Spaze Towers Pvt. Ltd., leaving no scope for tax evasion.
Please become a Premium member. If you are already a Premium member, login here to access the full content.
Author Bio
