1.  Commissioner of Income Tax Vs. Madurai Chettiyar Karthikeyan, Tax Case (Appeal) No.898 of 2013, Date of Order: 16.04.2014, High Court of Madras

Provisions of S. 2(22)(e) shall not apply to sum advanced to shareholder in ordinary course of business

The assessee is the proprietor of Shri Vekkaliamman Builders and Promoters and he also happens to be the Managing Director of Southern Academy of Maritime Studies Private Limited, in which he holds share of 63%. The Assessing Officer added a sum of Rs.87,57,297/- to the assessee's income under Section 2(22)(e) of the Income Tax Act, 1961 as deemed dividend from Southern Academy of Maritime Studies Private Limited, rejecting the assessee's contention that the company awarded construction contract to the assessee's proprietary concern after completing with the procedures of the companies Act.

Going by the undisputed fact that the Revenue had not disputed the fact that the assessee had executed work for the company in the nature of construction of buildings and the said transaction being in the nature of a simple business transaction, we do not find any justifiable ground to bring the case of the assessee within the definition of deemed dividend under Section 2(22)(e) of the Income Tax Act, 1961. In the circumstances, we reject the Revenue's case at the admission stage itself.

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2.  Potla Nageswara Rao. Vs. The Deputy Commissioner of Income Tax, ITA No. 245 of 2014, Date of Order: 09.04.2014, High Court of Andhra Pradesh

Whether capital gains arise in the year in which the possession is handed over to the developer under a development agreement or in which the consideration is received.

Section 2(47) of the Income Tax Act, 1961 & Section 53A of Transfer of Property Act, 1882.

In brief, assessee entered into a development agreement on 07.03.2003 with a developer. The assessee raised the contention that the transfer is deemed to have taken place in AY 2004-05 when the consideration has been actually received. However, the Ld. AO has raised the contention that to attract the capital gains it is sufficient that the right to receive consideration on a later date has been received by the assessee on transfer of the land being a capital asset for construction during the assessment year 2003-04.
Held that the payment of consideration on the date of agreement of sale is not required, it may be deferred for future date. The element of factual possession and agreement are contemplated as transfer within the meaning of section 2(47) of the Act r.w.s. 53 A of Transfer of Property Act. When the transfer is complete, automatically, consideration mentioned in the agreement for sale has to be taken into consideration for the purpose of assessment of income for the assessment year when the agreement was entered into and possession was given.

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