TaxTMI 
TaxTMI 
TaxTMI 
2008 (4) TMI 349
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.... that the accumulated profits are to be taken as the opening balance and not on the dates when the loan was advanced." 2. The brief facts giving rise to the appeal are these. The assessee respondent is a company engaged in the consultancy business. We are concerned with the asst. yr. 1996-97. While completing the assessment under s. 143(3) of the IT Ad the AO included an amount of Rs. 11, 11,772 as deemed dividend under s. 2(22)(e) of the Act. The amount was part of an amount of Rs. 25,42,772 advanced during the year to the assessee by another company by name Gorgeous Chemical (P) Ltd., in which the assessee company held 40 per cent of the shares as on31st March, 1996. The amount was advanced in the nature of loans and advances, pure and s....
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....fits. Attention was drawn to Expln. 2 to s. 2(22)(e). It was submitted that no exclusion was provided for capital profits expressly. The line of reasoning adopted by the AO that in cl. (e) the expression "whether capitalised or not" did not find place in contrast with the earlier clauses was also pressed into service. It was contended that the section provided for "deemed dividend" and such a provision should be given its full play. It was further contended that the judgment of the Supreme Court in P.K. Badiani vs. CIT 1976 CTR (SC) 466 : (1976) 105 ITR 642 (SC), which was relied on by the CIT(A), was distinguishable and was not applicable to the present case. 7. The learned representative for the assessee, on the other hand, submitted tha....
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....ount styled "the share premium account" and further says that the provisions of the Companies Act relating to the reduction of the share capital of the company shall apply as if the share premium account were paid up share capital of the company. Sub-s. (2) mentions five purposes for which alone the share premium account may be applied without attracting the provisions of the Companies Act relating to the reduction of the share capital. These are: (i) To pay up fully paid bonus shares to be issued to the members. (ii) To write off preliminary expenses of the company. (iii) To write off expenses of issue of shares or debentures or under-writing commission paid or discount allowed on such issues. (iv) To pay premium on the redemption ....
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....section is to create a new class of capital of a company which is not share capital but not distributable as income any more than any other capital asset. On a winding up the surplus monies in the shares (now securities) premium account will be returned to the shareholders as capital and so long as the company is a going concern, the same monies can never be returned to the shareholders except through the medium of a reduction petition or, in other words, except under exactly the same conditions as those under which any other capital asset can reach the shareholder's hands. [Re, Duffs Settlement Trusts, (1951) 1 All ER 869 (following Re,BatesMountainvs. Bates (1928) Ch 682 affirmed in (1951) 2 All ER 534). See also, Addl. CIT vs. Om Oil....
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....he provisions of the Companies Act in relation thereto. This provision of the Companies Act takes care of the argument of the Revenue that s. 2(22)(e) of the IT Act does not use the expression "whether capitalized or not". These words can have application only where the profits are capable of being capitalized. They are not applicable where the receipt in question forms part of the share capital of the company under the provisions of the Companies Act. This position has been recognised by the Supreme Court in CIT vs. Urmila Ramesh where at pp. 434-435 the following observations were made: "Sec. 2(22) of the Act has used the expression 'accumulated profits', 'whether capitalized or not'. This expression tends to show that u....