LALIT C. JOBANPUTRA,MUMBAI vs. DCIT CC 1(2), MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH MUMBAI BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND SHRI GIRISH AGRAWAL, ACCOUNTANT MEMBER ITA No. 7285/MUM/2025 Assessment Year: 2014-15

Lalit C. Jobanputra DCIT, CC - 1(2) 6th Floor, Citi Point, Mumbai Teli Galli, Andheri East., Vs. Mumbai - 400069 (PAN: AACPJ1804F) (Appellant) (Respondent) Present for: Assessee : Shri Satish Mody, Advocate Revenue : Shri Surendra Mohan, Sr. DR Date of Hearing : 28.04.2026 Date of Pronouncement : 23.07.2026 O R D E R PER GIRISH AGRAWAL, ACCOUNTANT MEMBER: This appeal filed by the assessee is against the order of ld. CIT(A)- 47, Mumbai vide order no. ITBA/APL/S/250/2025-26/1079793666(1), dated 20.08.2025, passed against the assessment order by ld. DCIT, Central Circle-1(2), Mumbai u/s. 143(3) of the Income-tax Act (hereinafter referred to as the “Act”), dated 30.11.2016, for Assessment Year 2014-15.

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genuine facts, and the submissions of the appellant with an intention to punish the appellant, and should be quashed and annulled. GROUND NO.2: Without prejudice to ground no. 1 above, the CIT(A) erred in upholding the additions made by the Ld. DCIT of Rs.4,89,04,842/- on account of deemed dividend income u/s.2(22)(e), even though the same is contrary to the facts of the case and applicable provisions of the Act.".

3.1. Assessee explained that the amounts received from JAS were not in the nature of loans or advances as contemplated under section 2(22)(e). It was submitted that JAS was engaged in the business of freight forwarding and logistics and was contemplating setting up a container storage yard for agricultural products. Since there were restrictions relating to acquisition of agricultural land by a company,

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assessee, being a director of the company, was authorised to acquire agricultural land on behalf of JAS. For this purpose, a Memorandum of Understanding (MOU) was stated to have been entered into between the assessee and JAS and the amounts were advanced to the assessee for the proposed acquisition of agricultural land. Assessee, further contended that the advances were in the nature of commercial/trade advances made in the ordinary course of business and were intended for the benefit and business purposes of JAS. Therefore, according to him, such advances could not be brought within the deeming fiction of section 2(22)(e).

3.2. Ld. Assessing Officer, however, did not accept the explanation of the assessee. According to him, MoU did not establish the actual purchase of agricultural land, no agreement for purchase of land was furnished and there was no one-to-one correlation between the amounts advanced and any payments allegedly made towards purchase of land. Accordingly, ld. Assessing Officer held that the advances were for the individual benefit of the assessee and treated the same as deemed dividend under section 2(22)(e). Aggrieved, assessee went in appeal before the ld. CIT(A).

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actually been purchased on behalf of JAS. It was therefore, held that assessee had failed to establish a nexus between the advances and the business objectives of the company. Accordingly, ld. CIT(A) confirmed the addition. Aggrieved, assessee is in appeal before the Tribunal.

5.1. In the present case, assessee has consistently stated that the amounts were received pursuant to an MoU entered into with JAS for acquisition of agricultural land on behalf of the company for its proposed business expansion. Assessee's explanation before the ld. Assessing Officer, as reproduced in the first appellate order, was that JAS intended to acquire agricultural land for setting up a container storage yard for agricultural products and, owing to restrictions on acquisition of agricultural land by a company, the assessee was authorised to acquire such land in his individual capacity. We note that ld. Assessing Officer rejected the explanation principally on the ground that assessee did not furnish evidence of actual purchase of agricultural

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land and that there was no one-to-one correlation between the advances and payments made for purchase of land. Ld. CIT(A) proceeded on the same basis and held that in the absence of proof of purchase of land, the business purpose of the advances was not established.

5.2. From the perusal of the order of ld. CIT(A), we note that assessee categorically mentioned that he is the promoter-director and shareholder of JAS which is a closely owned entity where the buck finally stops on his table. He has regular transactions with JAS in his capacity as its lender of the last resort. There is a running current account with JAS with continuous inflow and outflow of funds over the past several years. Assessee furnished details of closing balances for the past three years as tabulated below: As at (Rs.) 31.03.2011 1,49,69,134 Receivable 31.03.2012 1,48,86,227 Receivable 31.03.2013 34,46,807 Receivable 31.03.2014 2,01,70,425 Payable

5.3. From the above details furnished, we find that there is a different perspective given to the transactions undertaken by the assessee with JAS when compared with the submissions made before the ld. Assessing Officer which were solely in respect of advance given by JAS to the assessee for purchase of agricultural land on behalf of the company.

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company proposes to acquire an approximately 20 acres of agricultural land through and in the name of its director, i.e., the assessee, since under the present laws of State of Maharashtra there is a prohibition from acquiring any agricultural land by a company except with a written approval from the Collector and therefore, the company has proposed that it acquired agricultural land for setting up its facility through and in the name of the assessee by providing its own funds. On further perusal of this MoU, at point no.7 of the agreed terms between the parties, it is stated that assessee shall transfer the said land acquired in his name to the company at cost, by obtaining the requisite NA approvals in respect of the said land.

6.1. We find that in this MoU, on one hand the understanding stated is to acquire the land for the company by the assessee through him who shall hold it on behalf of the company, for which the funds shall be provided by the company, owing to restriction under the present laws of State of Maharashtra. However, on the other hand in the same MoU, it is stated that assessee shall subsequently transfer the land to the company at cost, after obtaining necessary approvals. If such a possibility exists, then to our mind, the company in the very first instance could acquire the land in its own name directly, by obtaining necessary approvals. Thus, the strong reliance placed by the assessee on the MOU does not support the intention with which funds have been transferred in the hands of the assessee.

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of the factual position emanating therefore about movement of continuous funds, with several dates being one after the another. Based on this fact, it cannot be construed that all these movements of funds are for the purpose of acquiring agricultural land as claimed by the assessee in his submission before the authorities below. Such a continuous movement of funds back and forth, does not in any way support the claim made by the assessee that the closing outstanding balance as a loan in his hands from the company is solely for the purpose of acquiring agricultural land through him, for and in behalf of the company which is to be transferred back to the company at a later point of time even though there are certain laws in the State of Maharashtra which prevents such a transfer, per version of assessee himself and terms contained in the MoU. The said general ledger is extracted below for ready reference:

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“(22)"dividend" includes— (a)………. …………. (e)……… but "dividend" does not include— (i)a distribution made in accordance with sub-clause (c) or sub-clause (d) in respect of any share issued for full cash consideration, where the holder of the share is not entitled in the event of liquidation to participate in the surplus assets; (ia)a distribution made in accordance with sub-clause (c) or sub- clause (d) in so far as such distribution is attributable to the capitalised profits of the company representing bonus shares allotted to its equity shareholders after the 31st day of March, 1964, and before the 1st day of April, 1965; (ii)any advance or loan made to a shareholder or the said concern by a company in the ordinary course of its business, where the lending of money is a substantial part of the business of the company; (iii)any dividend paid by a company which is set off by the company against the whole or any part of any sum previously paid by it and treated as a dividend within the meaning of sub-clause (e), to the extent to which it is so set off; (iv)any payment made by a company on purchase of its own shares from a shareholder in accordance with the provisions of section 77A of the Companies Act, 1956 (1 of 1956);

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(v)any distribution of shares pursuant to a demerger by the resulting company to the shareholders of the demerged company (whether or not there is a reduction of capital in the demerged company).”

[emphasis supplied by us by bold]

8.1. From the perusal of the above relevant portions of section 2(22)(e), we note that this definition also provides for what the dividend does not include. Assessee has submitted that it is a business advance which he obtained from JAS for the purpose of executing a business transaction for and on its behalf, a company in which he is a shareholder having substantial interest and therefore, the credit balance in his account treated as loan in his hands does not fall within the purview of section 2(22)(e).

8.2. In this regard, we make a specific reference to sub-clause (ii) of the said definition section which provides an exclusion from being treated as a dividend for any advance or loan made to a shareholder by a company in the ordinary course of its business where the lending of money is a substantial part of the business of the company. In the present case before us, lending of money is not a substantial part of the company JAS and therefore, case of assessee does not fall within the stated exclusion in the said section. What can be excluded from the definition of dividend are only the above listed and specified transactions and not otherwise.

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meritorious findings arrived at by the ld. CIT(A). Grounds raised by the assessee are dismissed.

Order is pronounced in the open court on 23 July, 2026

Sd/- Sd/- (Pawan Singh) (Girish Agrawal) Judicial Member Accountant Member Dated: 23 July, 2026 MP, Sr.P.S. Copy to: 1 The Appellant 2 The Respondent 3 DR, ITAT, Mumbai 4 Guard File 5 CIT BY ORDER, (Dy./Asstt.Registrar) ITAT, Mumbai