Where assessee, in terms of agreement with company for development and consideration of land owned by assessee, had received trade advances, the same were not loans, therefore, section 2(22)(e) was not attracted. The Tribunal while confirming the view of CIT(A) opined that amount in question was in the nature of trade advances to assessee made by company and not loans. Thus the addition was deleted.
FULL TEXT OF THE HIGH COURT ORDER / JUDGMENT
1. Revenue is in appeal against the judgement of the Income Tax Appellate Tribunal dated 28.02.2017 raising following questions for our consideration:
“1. Whether the Appellate Tribunal is right in law and on facts in directing to treat the gain of Rs. 4,74,873/- from sale of land as ‘long term capital gain‘ and not business income?
2. Whether the Appellate Tribunal is right in law and on facts in deleting the addition of Rs. 1,15,48,960/- made on
account of deemed dividend u/s. 2(22)(e) of the Act?”
2. The first question pertains to the treatment to the proceeds out of sale of land made by the assessee. According to the Revenue, the same should have been treated as a business income as against the assessee’s desire that the same should be treated as long term capital gain. The amount involved is quite small. This question is therefore not examined on merits.
3. The second question involving greater tax implication is of treating a sum of Rs. 1.15 crores in the hands of the assessee as
deemed dividend under section 2(22)(e) of the Act. The Tribunal, while confirming the view of the CIT (Appeals), was of the opinion that the amount in question was in the nature of trade advances to the assessee made by the company and not a loan. To come to such a conclusion the Tribunal relied on the judgement of the earlier assessment year in which, it was noted that the assessee had entered into an agreement with the company for development and consideration of the land which was owned by the assessee. Various transactions of such agreement pertain to the negotiation of sale price to be received by the assessee from the payments collected by the company. The Tribunal, therefore referred to the judgement of Delhi High Court in case of CIT vs. Rajkumar reported in 318 ITR 462 and held that trade advances made for the commercial transactions would not be hit by section 2(22)(e) of the Act.
4. We are broadly in agreement with the view of the Tribunal. No question of law arises. Tax Appeal is dismissed.