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TMI Blog2014 (3) TMI 572X X X X Extracts X X X X X X X X Extracts X X X X ..... hould be restricted to the accumulated profit, brought forward from earlier years and not the current year profit - Thus, the disallowance on account of deemed dividend u/s.2(22)(e), will be restricted in this ad-hoc and the balance disallowance will get deleted – Decided partly in favour of Assessee. Confirmation of ad-hoc addition of various expenses – Held that:- The AO has made the ad-hoc disallowances on the ground that some of these expenses have been incurred in cash and necessary evidences required in respect of the said claim are not properly vouched - Some personal element of expenses also cannot be ruled out - This finding of the AO has not been rebutted - looking to the nature of expenses as incorporated, as far as conveyance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rs.1,23,00,000/-, in her proprietary concern, M/s. Vijaykumar Associates and Rs.80,50,000/- in her personal capacity, from M/s. Tanvi Construction Co.(P) Ltd.. In response to the show cause notice as to why the deeming provision of section 2(22)(e) should not be invoked, the assessee submitted that during the normal course of conducting the business, the registration of the property sold by M/s. M/s. Tanvi Construction Co.(P) Ltd, is conducted by M/s.Vijaykumar Associates, itself and hence the said company has paid certain advance as deposits towards smooth and speedy registration of documents in respect of flats sold by M/s. Tanvi Construction Co.(P) Ltd. As on the last day unused balances are to be returned back to the company. Since, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vant material placed on record. The only issue involved before us is the quantum of disallowance which has to be sustained for the purpose of deemed dividend u/s.2(22)(e). From the perusal of the balance sheet and the profit and loss account for the 31st March 2007, it is seen that, reserve and surplus as on 31st March 2006 stood at Rs.18,64,751/- and as at 31st March 2007 it was Rs.29,40,933/- which also included the current year profit of Rs.10,76,183/-. The issue, whether the profit earned by the company during the year in which the loans were advanced that is, the current profit can be considered to be included within the accumulated profits of the company, has been settled by Catena of decisions. The Hon ble Supreme Court in case o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he decision of the Madras High Court was affirmed in appeal by this Court in CIT vs. M. V. Murugappan (1970) 77 ITR 818 (SC) : TC41R.121 and it was observed that ....the profits of the year in the course of which the company was ordered to be wound up not being accumulated profits were not part of the dividench Thereafter, the Bombay High Court in CIT vs. P. K. Badiani (1970) 76 ITR 369 (Bom) TC41R.276 while interpreting s. 2(6A)(e) of the Act, applied the same construction and held that the expression accumulated profits in that clause must mean profits which had accumulated prior to the accounting year of which the income profits and gains were being assessed, while current profits would mean the profits of the accounting year. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e present definition of accumulated profits by Expln. 2 to s. 2(22) of the IT Act, 1961, only clarifies what the true intent was all along. In the view which has found favour with us, we are not persuaded by that submission. 6. In view of the above established proposition of law, we agree with the contention of the learned counsel, that the accumulated profits should not include the current profit and therefore, the disallowance of deemed dividend should be restricted to the accumulated profit, brought forward from earlier years and not the current year profit. Thus, the disallowance on account of deemed dividend u/s.2(22)(e), will be restricted to Rs. 1,864,751/- in this ad-hoc and the balance disallowance will get deleted. We order a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reiterated the submissions made before CIT(A), whereas the learned DR strongly relied upon findings of the AO as well as CIT(A). 11. After carefully considering the relevant findings of the AO as well as CIT(A), we find that the AO has made the ad-hoc disallowances, mainly on the ground that some of these expenses have been incurred in cash and necessary evidences required in respect of the said claim are not properly vouched. Some personal element of expenses also cannot be ruled out. This finding of the AO has not been rebutted before us. However looking to the nature of expenses as incorporated above, we find that as far as conveyance expenses and telephone charges are concerned, personal element cannot be ruled out as the assessee i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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