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2014 (3) TMI 572 - AT - Income TaxDeemed dividend u/s 2(22)(e) of the Act – Quantum of disallowance - Whether the profit earned by the company during the year in which the loans were advanced can be considered to be included within the “accumulated profits’ of the company – Held that:- The decision in Commissioner of Income-Tax, Kerala Versus V. Damodaran And Another [1979 (10) TMI 5 - SUPREME Court] followed - the word “accumulated profit”, cannot mean to construe to include current profit for the purpose of deemed dividend - The contention of the assessee is accepted that the accumulated profits should not include the current profit - 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 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 expenses and telephone charges are concerned, personal element cannot be ruled out as the assessee is an individual - The other expenses also, though are for the business purposes, but due to lack of proper evidences, entire claim cannot be said to be fully verifiable – thus, the disallowance is restricted to 5% - Decided partly in favour of Assessee.
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