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TMI Blog2012 (3) TMI 62X X X X Extracts X X X X X X X X Extracts X X X X ..... mt. Susan Thomas Jose, JCIT O R D E R PER GEORGE GEORGE K : This appeal instituted by the assessee is directed against the order of the CIT (A)-I, Bangalore dated 20.12.2010. The relevant assessment year is 2005-06. 2. The solitary issue that arises for our consideration is whether the CIT(A) is justified in confirming the addition of Rs.2,50,000/- under section 2(22)(e) of the Act. 3. The brief facts of the case are as follows:- The assessee is an individual. For the concerned asst. year, return of income was filed on 26/9/2005 declaring an income of Rs.1,83,600/-. Subsequently, notice under section 148 of the Act was issued on 5/2/2008. The re-assessment was completed vide order dated 29/12/2008. In the re-assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lakhs resulting in a debit balance of Rs.18,56,418/-. However, the money brought towards the capital by the earlier Directors amounting to Rs.51 lakhs was credited to the reserve and surplus as capital receipt. This amount was foregone by the Directors who had exited from M/s Akash Hatcheries Pvt. Ltd. In the hands of M/s Akash Hatcheries Pvt. Ltd., the amount of Rs.51 lakhs, foregone by the Directors, was added as notional income under section 41 of the Act. On further appeal, the addition made under section 41 of the Act in the hands of M/s Akash Hatcheries Pvt. Ltd. was deleted. Therefore, it was pleaded that the amount of Rs.51 lakhs cannot be reckoned to arrive at the accumulated profits on the day of giving of loan to the assessee by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it must be real and divisible. Even in case of notional profit, if conditions of S.2(22)(e) are fulfilled the same has to be taxed as deemed dividend . Here all the conditions are fulfilled. The appellant has more than 10% voting power in the company. The company has given loan of Rs.2,50,000/- to the appellant M. D. Books show the opening balance of accumulated profit of Rs.29,33,669/- and therefore I hold the addition justified . 7. The assessee being aggrieved is in appeal before us. 8. The learned counsel for the assessee submitted that the provisions of section 2(22)(e) of the Act are applicable only to the extent of accumulated profits as are available. It was submitted that the accumulated profits as on the date of advancing mon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rred to as the said concern)] or any payment by any such company on behalf, or for the individual benefit, of any such share holder, to the extent to which the company in either case possess accumulated profits . 10.1 One of the conditions precedent for invoking the provisions of section 2(22)(e) of the Act is that there should be accumulated profits as on the date of advancing loans to the shareholder, who is having beneficial interest in the company not less than 10% of the voting power. It is the case of the assessee that there are no accumulated profits for M/s Akash Hatcheries Pvt. Ltd. as on the date of advancing loan to the assessee. It is the contention of the assessee that the money brought towards capital by the directors amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1(1) of I T Act 10.4. Therefore, in arriving at the accumulated profits of M/s Akash Hatcheries Pvt. Ltd., we direct that the amount of Rs.51 lakhs should not be taken into account, since it has already been deleted by the first appellate authority for the assessment year 2003-04. The learned AR has confirmed that the CIT(A) s order in the case of M/s Akash Hatcheries Pvt. Ltd. for the asst. year 2003-04 has attained finality, since no appeal has been preferred by the revenue as against deletion of addition under section 41(1) of the Act. 10.5. However, there has been no examination by the Income Tax authorities that as on the date of advancing the loan by M/s Akash Hatcheries Pvt. Ltd. to the assessee, whether there was accumulated pr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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