Case Number: ITA 759/DEL/2019
Appellant: JCIT, Circle-22(1), New Delhi
Respondent: Sanjana Realcon Pvt. Ltd., New Delhi
Assessment Year: 2013-14
Result: Favorable to Respondent
Case Filed On: February 1, 2019
Order Type: Final Tribunal Order
Date of Order: December 20, 2022
Pronounced On: December 20, 2022
The case ITA 759/DEL/2019 involves the appellant, JCIT, Circle-22(1), New Delhi, challenging the deletion of an addition made by the Commissioner of Income Tax (Appeals)-XXVIII, New Delhi [‘CIT(A)’] under Section 2(22)(e) of the Income Tax Act, 1961, against Sanjana Realcon Pvt. Ltd., New Delhi, for the assessment year 2013-14. The case was filed on February 1, 2019, and the final order was pronounced on December 20, 2022.
Sanjana Realcon Pvt. Ltd., a real estate developer, was assessed for the year 2013-14. During the scrutiny assessment, the Assessing Officer (AO) observed that the company had received loans from Landspace Construction Pvt. Ltd., where the respondent held a substantial interest. The AO classified the received amount as deemed dividend under Section 2(22)(e) of the Income Tax Act and made an addition of Rs. 2,53,75,000/- to the total income of Sanjana Realcon Pvt. Ltd. The respondent contested this addition before the CIT(A), arguing that the transactions were business transactions and not loans, supported by a Memorandum of Understanding (MOU).
During the proceedings, the appellant was represented by Ms. Kajal Singh, Senior Departmental Representative (DR), and the respondent was represented by Shri Anand Choudhary, Advocate. The primary arguments centered on whether the amount received from Landspace Construction Pvt. Ltd. should be classified as a loan under Section 2(22)(e) or as a business transaction.
The Revenue argued that the transactions recorded in the financial statements as inter-corporate loans indicated that the amount received from Landspace Construction Pvt. Ltd. was indeed a loan. The AO contended that the MOU was a façade created to disguise the true nature of the transaction, which was effectively a loan, as evidenced by the repayment of Rs. 92,27,713/- and the classification of the amount in the financial statements.
The respondent argued that the amount received was a part of a business transaction for the acquisition of 50% rights in two real estate properties in Sun Court Apartments, Greater Noida. The respondent provided evidence of the MOU, the provisional allotment letters, and the subsequent sale agreement with Garrison Developers Pvt. Ltd., which demonstrated that the transactions were commercial in nature and not loans. The respondent also pointed out that profits from the sale of the properties were shared equally between Sanjana Realcon Pvt. Ltd. and Landspace Construction Pvt. Ltd., further supporting their claim.
The tribunal, consisting of Judicial Member Shri Chandra Mohan Garg and Accountant Member Shri Pradip Kumar Kedia, reviewed the case in detail. Key points from the tribunal’s findings include:
The tribunal upheld the CIT(A)’s decision, concluding that the amount of Rs. 2,53,75,000/- received by Sanjana Realcon Pvt. Ltd. from Landspace Construction Pvt. Ltd. was a commercial/business transaction related to the acquisition of property rights and not a loan. The tribunal found no justification in the Revenue’s allegations and dismissed the appeal, confirming that the transactions were outside the purview of Section 2(22)(e) of the Income Tax Act.
Order Pronounced in the Open Court on 20th December, 2022
Signatures:
(Chandra Mohan Garg, Judicial Member) (Pradip Kumar Kedia, Accountant Member)
Date: 20/12/2022
Copy forwarded to:
Assistant Registrar
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