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TMI Blog2019 (4) TMI 1226X X X X Extracts X X X X X X X X Extracts X X X X ..... of dividend. In the given case, no doubt, it is showing accumulated profit, but, it has determined tax liabilities, after deducting the tax liabilities, the profit available in the business for the purpose of dividend is negative accumulated profit. Therefore, the accumulated profit for the purpose of section 2(22)(e) is nil, hence, we delete addition u/s 2(22)(e) even though in this case, all the ingredients available to invoke the provision but the company does not have enough accumulated profit for distribution of dividend after deduction of tax liabilities. Accordingly, ground raised by the assessee is allowed. - I.T.A. No. 1536/HYD/2018 - - - Dated:- 18-4-2019 - Smt. P. Madhavi Devi, Judicial Member And Shri S. Rifaur Rahm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that there will not be any reserves from the financial years 2009-10, 2010-11 and 2011-12 because of MAT liabilities to the extent of ₹ 1.10 Crores paid in the year 2016-17 against the demand raised in the orders passed u/s. 154 of the Act and he requested not to charge any deemed dividend and also further stated that reserves shown in the Balance Sheet of FY. 2011-12 relevant for AY 2012-13not deducted by taxes of ₹ 4,50,132/- paid during the year. 4.1. The Assessing Officer rejected the contentions of the AR and opined that the payment towards MAT liabilities arising in subsequent years and by the time the books of account are already finalised for the FYs. 2009-10, 2010-11 and 2011-12 as per the Companies Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the AO is correct and the Reserves and Surplus are to be seen as provided u! s. 2(22)(e) of the Act in the term accumulated profits which are given as per explanation 1 and explanation 2 of the said subsection and nowhere such clarification is provided or intended as contended by the AR. Therefore, a subsequent charge of liability after giving loans and advances and in a subsequent year will not have a bearing on the year in which such deemed dividend has arisen Therefore, the contentions of the appellant as submitted in the facts of the case are rejected. It has already been stated that none attended in spite of providing opportunity on 03.04.2018, 11.04.2018, 09.05.2018 and 28.05.2018 leaving the matter to be decided ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of income on 11-08-2012. He submitted that even though the company was aware of the tax liabilities for the AYs. 2010-11 and 2011-12, it has not brought the above liability on record while completing the Balance Sheet on 31-03-2012. He submitted that by bringing on record the established liability of income tax, the reserves declared by the company in the Balance Sheet, which is placed on record at Pg.14 of the Paper Book will be NIL. Therefore, the reserves of the company is NIL. The provisions of Section 2(22)(e) of the Act will not be attracted in the case of assessee. Further, he submitted that the company has also paid the tax liability for the AYs. 2010-11 and 2011-12 during the AY. 2016-17. In support of the above claim, he filed a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /s. 143(1) of the Act on the Balance Sheet date. Since it is an established tax liability and as per the decision relied on by the assessee, the department should consider the above tax liability while considering the status of the accumulated profit of the assessee in order to initiate any proceedings u/s. 2(22)(e) of the Act. The relevant portion in the case of M/s Gautam Sarabhai (supra), on which reliance placed by the Ld. AR, is reproduced below: 41. We have considered the matter and are inclined to accept the contention of the learned counsel for deduction of the tax liabilities of ₹ 17,38,04,000 as well as ₹ 23,47,000. The various decisions cited by the learned counsel fully support the claim for deductio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In such circumstances to take the figure of general reserve from the balance sheet for ascertaining the accumulated profits would not be a correct procedure for the quantum of the general reserves would not represent the accumulated profits. 42. It has been observed by the Madras High Court in CIT vs. G. Narasimhan (1979) 9 CTR (Mad) 210 : (1979) 118 ITR 60 (Mad) :- If the liabilities that accrued from year to year has been taken into account year by year and the accumulated profits had been depleted year by year by writing down the accumulated profits and only the balance carried over, the total of the accumulated profits in any given year will be less than in cases where there has been no deduction made ..... X X X X Extracts X X X X X X X X Extracts X X X X
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