AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2013 (1) TMI 42
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....cts and in the circumstances of the case, the ld. CIT(A)-II, Ludhiana has erred in holding that it is only on 29.3.2008 the assessee has debit balance of Rs. 11,75,569/- and this amount can be considered as deemed dividend in the hands of appellant. The ld. CIT(A) has further erred in holding that total accumulated profits of Radhe Sham Jain Diamond Jewellers (P) Ltd was Rs. 34,858/- only, whereas, the Reserves and surplus in the balance sheet of Radhe Sham Diamond Jewellers (P) Ltd. as on 31.3.2008 shows Rs. 11,17,80,000/- under the head share premium account." 3. Brief facts of the case are that the assessee was running a proprietorship concern under the name and style of M/s Jain Diamond Jewellers. This proprietorship concern was conver....
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....d. 5. The ld. CIT(A) found force in the submissions and observed that a sum of Rs. 1.50 crores was basically on account of capital of the assessee originally in the hands of the proprietorship concern against which the cheque was issued. Since later on the cheque was returned to the company and the said company has issued the cheque and therefore, withdrawal by the assessee from the company to this extent could not be treated as loan. However, he further noted that on 29.3.2008 that there was a debit balance amounting to Rs. 11,75,565/- and therefore, to this extent provisions of section 2(22)(e) were applicable. However, he further noted that since accumulated profits were only Rs. 34,858/- therefore, only a sum of Rs. 34,858/- can be tre....
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.... which was credited by the company to the assessee's account on 15.3.2008 and the money has been withdrawn by the assessee only after the date. Thus at no point of time, there was a debit balance and debit balance arose only on 29.3.2008 amounting to Rs. 11,75,569/-. However, accumulated profits of the company was only Rs. 34,858/- as reflected in the balance sheet of the company. Thus the CIT(A) has correctly applied the provisions of section 2(22)(e) of the Act only to the extent of Rs. 34,858/-. He also referred to ground No. 2 and submitted that Revenue has wrongly taken the ground that accumulated profits could not be taken only at Rs. 34,858/- whereas reserve and surplus account in the balance sheet shows a figure of Rs. 11,17,80,....
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.... The plain reading of above provision clearly shows that the payment by the company in which public is not substantially interested by way of advance or loan to a shareholder who is holding shares not less than 10%, is to be treated as deemed dividend. It is further noted that such deemed dividend can be there only to the extent of accumulated profits. 9. In case before us, there is no doubt that M/s Radhe Sham Jain Diamond Jewellers (P) Ltd is a company in which public is not substantially interested and the assessee i.e. Shri Radhe Sham Jain is holding more than 10% shares. However, the question is whether the said company has given any advance or loan to the assessee or not? The company was incorporated by way of conversion of proprieto....
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....fact that this seems to be adjustment entry. We are of the opinion that the AO has failed to appreciate that because of the conversion of the proprietorship concern, the cheque could only be encashed by the assessee. The cheque has been shown as liability in the balance sheet of proprietorship concern and was later on returned by the assessee to the Private Limited company. Since all the assets have been taken over by the Private Limited company, the said company owned assessee this amount of Rs. 1.50 crores which was credited to his account on 15.3.2008. Because of non-encashment of the cheque the same is not reflected in the bank statement. This fact has been correctly appreciated by the ld. CIT(A). 10. The ld. CIT(A) has further correct....
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....eeming provisions of section 2(22)(e) cannot apply - Section 78(1) of the Companies Act, 1956 says that any payment out of the share premium account, except for purposes authorized by sub-section (2) will be treated as reduction of share capital attracting the provisions of the Companies Act in relation thereto - The expression "whether capitalized or not" can have application only where the profits are capable of being capitalized and not where the receipt in question forms part of the share capital of the company under the provisions of the Companies Act - In view of the provisions of the Companies Act, share premium cannot be stated to be commercial profits - Amount of Rs. 1,85,821/- alone out of the amount of Rs. 25,42,772/- can be asse....