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2010 (5) TMI 64 - HC - Income TaxDeemed Dividend – Accumulated profit - The assessee is a share-holder in Jyoti Theatres Pvt. Ltd. The assessee holds 35% of shareholding in that company. In the year in question, the assessee obtained a loan of Rs 15 lakhs from Jyoti Theatres Pvt. Ltd. The Assessing Officer treated the said amount as deemed dividend to the extent of accumulated profit of Rs 13,33,493.85 shown in the balance sheet of the said company as on 31.03.2001. – CIT(A) deleted the said addition after taking note of the fact that Jyoti Theatres Pvt. Ltd had a liability of Rs 57,81,997/- towards house tax payable by the said company to the Municipal Corporation of Delhi (MCD). Consequently, if the said sum of Rs 57,81,997/- is deducted from the accumulated profit of Rs 13,33,493.85 as shown in the balance sheet by the said Jyoti Theatres Pvt. Ltd, then the company would have accumulated losses rather than profit. As a result, the said loan of Rs 15 lakhs or any part thereof could not be treated as deemed dividend within the meaning of Section 2(22)(e) of the Income-tax Act, 1961 – ITAT confirmed the order of CIT(A). Held that: that the books of accounts as prepared by any assessee are not decisive. The provisions of the Income-tax Act, 1961 would have to be gone into and the liability has to be determined on the basis of the provisions of the said Act. Furthermore, the treatment given by Jyoti Theatres Pvt. Ltd would not bind the present assessee where the present assessee is able to show that he is not otherwise liable to pay any tax on a particular item as per the provisions of the said Act. In fact, the present assessee cannot be precluded from showing that the said amount of house tax payable was an ascertained liability irrespective of the fact that Jyoti Theatres Pvt. Ltd had treated the same as a contingent liability. – Decided in favor of assessee
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