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2016 (3) TMI 741 - AT - Income TaxReopening of assessment - deemed dividend u/s 2(22) - Held that:- Prima facie going by the ld. Counsel's contention on merits, we find that the Assessee had no accumulated profits up till 31.3.2005 which is evident from the balance-sheet. Only the current year's reserves and surplus is ₹ 65,36,884/- which is on account of net loss carried to the balance-sheet. The Hon'ble Supreme Court in the case of CIT vs. V. Damodaran (1979 (10) TMI 5 - SUPREME Court) after considering the various decisions has interpreted that "accumulated profit" cannot be construed to include current profits and there is a distinction between "accumulated profits" and "current profits". If the Assessee did not had any accumulated profits brought forward from the earlier years, then, the provision of deemed dividend cannot be invoked on the current year's profit. This is a settled position of law. Here, in this case, once there is no accumulated profits brought forward from the earlier years, then, the provision of deemed dividend u/s 2(22)(e) of the Act cannot be invoked for taxing the reserves and surplus or the profits of the current year. Accordingly, the addition made by the AO cannot be sustained at the threshold. - Decided in favour of assessee.
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