TaxTMI 
TaxTMI 
2012 (3) TMI 62
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....r section 2(22)(e) of the Act. 3. The brief facts of the case are as follows:- The assessee is an individual. For the concerned asst. year, return of income was filed on 26/9/2005 declaring an income of Rs.1,83,600/-. Subsequently, notice under section 148 of the Act was issued on 5/2/2008. The re-assessment was completed vide order dated 29/12/2008. In the re-assessment order, the Assessing Officer had made an addition of Rs.2,50,000/- under section 2(22)(e) of the Act. The assessee had received an advance of Rs.2,50,000/- from M/s Akash Hatcheries Pvt. Ltd. during the financial year relevant to the asst. year 2005-06. The assessee was a Managing Director of the above said company and also a beneficial owner holding more than 10% of the....
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.... of Rs.51 lakhs, foregone by the Directors, was added as notional income under section 41 of the Act. On further appeal, the addition made under section 41 of the Act in the hands of M/s Akash Hatcheries Pvt. Ltd. was deleted. Therefore, it was pleaded that the amount of Rs.51 lakhs cannot be reckoned to arrive at the accumulated profits on the day of giving of loan to the assessee by M/s Akash Hatcheries Pvt. Ltd. It was contended that the accumulated profits will be negative if Rs.51 lakhs is reduced. 6. The CIT(A), however, rejected the contentions raised and dismissed the appeal filed by the assessee. The relevant finding of the CIT(A) reads as follows:- "The above shows that the appellant has added the amount of Rs.512,03,020/- i....
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....ated profit of Rs.29,33,669/- and therefore I hold the addition justified". 7. The assessee being aggrieved is in appeal before us. 8. The learned counsel for the assessee submitted that the provisions of section 2(22)(e) of the Act are applicable only to the extent of accumulated profits as are available. It was submitted that the accumulated profits as on the date of advancing money by M/s Akash Hatcheries Pvt. Ltd. to the assessee showed positive figure only on account of the addition of notional figure of Rs.51 lakhs in the asst. year 2003-04 which represented the loans foregone by erstwhile Directors of M/s Akash Hatcheries Pvt. Ltd. It was further pointed out that the CIT(A)'s finding at para 5 that addition under section 41(1) ....
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....s on the date of advancing loans to the shareholder, who is having beneficial interest in the company not less than 10% of the voting power. It is the case of the assessee that there are no accumulated profits for M/s Akash Hatcheries Pvt. Ltd. as on the date of advancing loan to the assessee. It is the contention of the assessee that the money brought towards capital by the directors amounting to Rs.51 lakhs, which was foregone and added as notional income under section 41 of the Act, cannot be reckoned while arriving at the accumulated profits as on the date of advancing loan to the assessee. 10.2. We have perused the appellate order dated 22/12/2006 (ITA No.97/AC-11(1)/CIT(A)-I/06-07) in the case of M/s Akash Hatcheries Pvt. Ltd.. We ....