TMI Blog1989 (8) TMI 139X X X X Extracts X X X X X X X X Extracts X X X X ..... do Agencies (Pharma) Private Limited, Madras and she had taken loans from the company totalling Rs.3,78,409. This fact was not disclosed in the return filed originally. The I.T.O. reopened the assessment u/s 147(a) and brought the sum of Rs.3,78,409 to tax as deemed dividend u/s 2(22)(e) inasmuch as the company was possessed of accumulated profits exceeding this amount. The assessee agitated to the reopening of the assessment and also the computation of the figure of deemed dividend. The CIT(A) held that there was failure to disclose the relevant particulars at the time of completion of the original assessment and, therefore, the reopening was valid. As regards the objection to the inclusion of the sum of Rs.3,78,409 as deemed dividend, hel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the findings of the C.I.T.(A) about the quantum of deemed dividend. 5. We find that the original return in this case was accompanied by dividend warrants ; but no other particulars relating to the account of the assessee with M/s Indo Agencies (Pharma) Private Ltd. and the shareholding therein were disclosed. The assessee held shares to the extent of 93% of the paid up capital of the company. Neither this fact nor the fact of loan came to be disclosed. These are relevant and material particulars. The reopening is, therefore, valid in law. It is noteworthy that it was only from a scrutiny of the records of the company that the I.T.O. came to know about the loan transactions. 6. On the question of the company having accumulated profits, e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ---- 1970-71 1971-72 (3,02,179) 41378 439400 177599 Loss 1971-72 1973-74 1,77,599 100615 --- 278214 1972-73 1974-75 2,78,214 13004 --- 291222 1973-74 1975-76 2,91,222 17572 --- 308794 1974-75 1976-77 3,08,794 (18376) 220700 511118 Loss 1975-76 1977-78 5,11,118 6220 --- 517338 1976-77 1978-79 5,17,338 29,631 --- 546969 1977-78 1979-80 5,46,969 (30,397) --- 516572 Loss ----------------------------------------------------------------------------------------------------------------------------------------------- It will be obvious from the above that but for the inclusion of the two sums of Rs.4,39,400 in the year ending 30-6-71 and Rs.2,20,700 in the year ending 30-6-75, the net result of the computation would have be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before us arguments were advanced to the effect that the loan from the bank should be deducted in working out the capital gains. Reliance was placed on two orders of the Tribunal in N.M.A. Mohammed Haneefa v. ITO [1987] 23 ITD 409 (Mad.) and N. Vajrapani Naidu v. ITO [1989] 28 ITD 459 (Mad.) in support of this plea. The learned departmental representative rebutted these arguments and supported the orders of the I.T.O. and the conclusions of the C.I.T.(A). 9. We are unable to accept the argument of the learned counsel for the appellant. The I.T. Act is a code by itself and computation has to be done as per the definitions and terms used under the I.T. Act. Profits arising from the transfer of capital asset effected in the previous year sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the consideration the cost of acquisition of the asset. If by pledging or mortgaging the property some part of the interest in the same is taken as transferred, then there should be a diminution in the cost as well as in the fun consideration for the property and the one will off set the other. It is true that property is a bundle of rights and the pledgee or the loanee or the mortgagee gets an interest in the property. That may not be a ground for subtracting the loan value from the full consideration due to the assessee. The doctrine of overriding title and the concept of real income cannot be imported to subtract only one part of the transaction to defeat the claims of the Revenue in the computation of capital gains. If the loan amount i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Indira's case came up for consideration before a Full Bench of the Madras High Court in Smt. S. Valliammai v. CIT [1981] 127 ITR 713. His Lordship Mr. Justice Ramanujam delivering the judgment of the Full Bench held as follows at page 727 of the reports :-- "In the light of what we have stated above, we are not inclined to accept the assessee's contention that the removal of any burden, encumbrance or obligation on the asset will amount to an addition to the asset as such. Nor are we inclined to hold that any expenditure resulting in any addition to the value of the asset has to be treated as the cost of making any addition to the asset as such. In the view we have taken, no exception could be taken to the decision in CIT v. V. Indira ..... X X X X Extracts X X X X X X X X Extracts X X X X
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