Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2018 (2) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2018 (2) TMI 1085 - AT - Income TaxDeemed dividend u/s 2(22)(e) - capital subsidy/grant receipt - urrent accommodation adjustments accounts/trade advances - whether or not in the nature of loan or advance - Held that:- The provision of S. 2(22)(e) along with its Explanations – 2 as stood at the relevant point of time, shall only mean that the expression "accumulated profits" shall only include all the profits of the company up to the date of distribution which are normal revenue profits. The words used are plain, clear and unambiguous that only the profits of the company are to be considered for this purpose. The said provision nowhere indicates that capital subsidy/grant should also be included/ considered within the expression “accumulated profits”. The amount of capital subsidy of ₹ 36.87 lakh could not be considered as a accumulated profit and is out of the preview of the S. 2(22)(e). Accordingly, the ld. CIT(A) was not justified in holding that the amount of capital subsidy was a part of accumulated profited to be considered as deemed dividend under S. 2(22)(e). Therefore, for this reason also, the addition made of the deemed dividend to this extent was not justified. Thus the alternate plea of the assessee is allowed. Disallowance u/s 37(1) - assessee had advanced interest free to one Shri Neeraj Kumar, who is son in law of the assessee - Held that:- In this case also, in absence of anything to the contrary, as per the settled legal position, a presumption can be drawn that advance given of ₹ 7,92,300/- to Shri Neeraj Kumar were out of the huge interest free capital of ₹ 40 lacs, which was many times more. In view of this, we do not agree with the observation of the ld. CIT(A) that the appellant failed to substantiate his claim by a fund flow statement. Thereapart, such interest free fund could be utilized by the assessee for any purpose whatsoever as held by the Hon’ble jurisdiction High Court in the case of ACIT v/s Ram Kishan Verma (2012 (5) TMI 417 - ITAT, Jaipur) and in Hero Cycle P. Ltd vs. CIT (2015 (11) TMI 1314 - SUPREME COURT OF INDIA). Hence, the CIT(A) was not justified in confirming the disallowance and the same is directed to be deleted. Thus Ground No. 2 of the assessee is allowed.
|