Principal Commissioner Of Income Tax(Central)-2 v. M/S Saga Township Pvt. Ltd.through :None

$~32 *IN THE HIGH COURT OF DELHI AT NEW DELHI+ITA 1158/2018 PRINCIPAL COMMISSIONER OF INCOME TAX(CENTRAL)-2 ..... Appellant Through :Mr.Sanjay Kumar with Mr.Asheesh Jain,Advocates. versus M/S SAGA TOWNSHIP PVT. LTD.Through :None. ..... Respondent CORAM:HON'BLE MR. JUSTICE SANJIV KHANNAHON'BLE MR. JUSTICE ANUP JAIRAM BHAMBHANI O R D E R%23.10.2018 Present appeal filed by the Revenue under Section 260A of theIncome Tax Act 1961 (hereinafter referred to as the ‘Act’) impugnsthe order dated 30.05.2018 passed by the Income Tax AppellateTribunal (hereinafter referred to as the ‘Tribunal’) deleting penalty ofRs.83,00,000/- imposed under Section 271D read with Section 269SSof the Act. 2.M/s. Saga Township Pvt. Ltd. ('respondent-assessee' for short)is a company which had entered into a joint venture with M/s SaamagConstruction Ltd. vide Memorandum of Understanding (MoU) dated02.06.2006. 3.M/s. Saamag Construction Ltd. had paid total amount of Rs.83,00,000/- on different dates to the respondent-assessee in cash. 4.The Assessing Officer had treated these payments as loan ordepositpaidbyM/s.SaamagConstructionLtd.totherespondent/assessee. The Penalty Order dated 25.02.2013 observesthat the respondent-assessee and M/s Saamag Construction Ltd. weresister companies and both had in the books recorded the relevanttransactions under the head of unsecured loans and advancesrespectively. Further transactions for the purpose of buying land werenot excluded under the proviso to Section 269SS of the Act.Accordingly, penalty of Rs. 83,00,000/- was imposed under Section271D of the Act. 5.The penalty was, however, deleted by the Commissioner ofIncome Tax (Appeals) vide order dated 25.10.2013, who held that thepayment pursuant to the MoU was to develop an integrated townshipin Rudra Pur (Uttarakhand). The respondent-assessee was to purchasethe land and develop the same in association with M/s SaamagConstruction Ltd. Latter was responsible for arranging finance for theproject. Accordingly, M/s Saamag Construction Ltd. had providedfunds on different dates. Rs. 53,21,800/- was used to pay saleconsideration to farmers/land owners and Rs. 28,54,400/- was forpayment of stamp duty. Further, the Assessing Officer had notdisputed genuineness of transactions between the respondent-assesseeand M/s Saamag Developers Pvt. Ltd. 6.Aggrieved, the Revenue filed an appeal before the Tribunal,which upheld the finding of Commissioner of Income Tax (Appeals)holding:- 6.Aggrieved, the Revenue filed an appeal before the Tribunal,which upheld the finding of Commissioner of Income Tax (Appeals)holding:- “We have heard the rival submission and perused therelevant material on record. The fact that amount mentionedby the Ld. Additional Commissioner of Income Tax in theimpugned order, have been received consequent to theMemorandum of Understanding (MOU) among the partiesi.e. the assessee, M/s Saamag construction Limited and M/sSaamag developers Private Limited, has not been disputedby the Revenue. In furtherance of the MOU, the assesseereceived payment and made payment in cash for tokenmoney as well as for a stamp duty. The only argument of theLd DR is that those transactions have been recorded inbalance sheets of the companies as unsecured loans. In ouropinion, when payments have been received in cash in termsof MoU in relation to business purpose, the purpose oftransaction is business transaction and same cannot betreated as loan/deposit irrespective of the manner in whichaccounting entries have been made in the books of accounts.In substance, the transactions are business transactions. Inour opinion, the finding of the Ld. CIT(A) on the issue indispute is well reasoned. Further, the amounts are beenreceived in cash for payment to farmers as well as paymentto government accounts for a stamp duty. The contention ofthe assessee that it could not comply with the requirement ofsection 269SS due to reasonable failure on its part, has alsobeen considered by us. The argument of the Ld. counsel isjustified to some extent as it is generally known that whilepurchase of land, farmers accepted sometimes by stamp dutyauthorities. In our opinion, it constitutes a reasonable causefor not adhering to the provisions of section 269SS by theassessee.” 7.Learned counsel for the respondent-assessee has drawn ourattention to the MoU dated 02.06.2006 and submits that therespondent-assessee was obligated to purchase land in its own nameand develop the same in association with M/s Saamag ConstructionLtd. 8.The MoU however also records that all costs relating to theproject shall be financed by M/s Saamag Construction Ltd. There wasastipulationthatdevelopmentcost/expensesandpromotionalexpenses shall be borne by the respondent-assessee and uponcompletion of the project, net profit shall be distributed equallybetween them. 9.We are of the view that the findings recorded by the Tribunalcannot be said to be perverse and contrary to facts and law. To attractprovisions of Section 269SS, the amount paid in cash must be eitherloan or deposit. In the present case the respondent-assessee and M/sSaamag Construction Ltd. had entered into a joint venture andpayments were made by M/s Saamag Construction Ltd. in terms ofthe MoU. These payments were not to be refunded.Essentialattributes of a loan or deposit, is the right to claim payment andobligation to re-pay. This was missing. On completion of project, thenet profit was to be distributed between the respondent-assessee andM/s Saamag Construction Ltd. It is a well settled principle applicableto income tax that entry in the books of account on description andtreatment is not decisive as to the nature of the transaction as held bythe Supreme Court in Kedarnath Jute Mfg. Co. Ltd. Vs. CIT[1971]82 ITR 363 (SC). 10.Clearly Section 269SS of the Act does not apply to everytransaction. Therefore Section 269ST of the Act was enacted byFinance Act, 2017 w.e.f. 01.04.2017. This section postulates that noperson shall receive an amount of Rs. 2,00,000/- or more in aggregatein cash from any person in respect of a single transaction or in respect of transactions relating to one event or occasion, otherwise than byway of account payee cheque, account payee bank draft or by way ofelectronic clearing system through a bank account. The said Section269ST of the Act is not applicable to the present assessment year.11.In view of the aforesaid discussion, we do not find any merit inthe present appeal and the same is dismissed in limine. SANJIV KHANNA, J. OCTOBER 23, 2018sa 10.Clearly Section 269SS of the Act does not apply to everytransaction. Therefore Section 269ST of the Act was enacted byFinance Act, 2017 w.e.f. 01.04.2017. This section postulates that noperson shall receive an amount of Rs. 2,00,000/- or more in aggregatein cash from any person in respect of a single transaction or in respect of transactions relating to one event or occasion, otherwise than byway of account payee cheque, account payee bank draft or by way ofelectronic clearing system through a bank account. The said Section269ST of the Act is not applicable to the present assessment year.11.In view of the aforesaid discussion, we do not find any merit inthe present appeal and the same is dismissed in limine. SANJIV KHANNA, J. OCTOBER 23, 2018sa ANUP JAIRAM BHAMBHANI, J.