TaxTMI 
TaxTMI 
2014 (3) TMI 572
X X X X Extracts X X X X
X X X X Extracts X X X X
....the Act. 2.The learned CIT(A) erred in confirming ad-hoc addition of Rs.102235/- being 10% of various expenses.." 2. Brief facts of the case are that the assessee is an individual engaged in the business of registration of documents from her proprietary concern, M/s. Vijaykumar Associates. She was also a director in a company, M/s. Tanvi Construction Co.(P) Ltd, wherein, she had interest in excess of 10% of voting power. The Assessing Officer has from the audited accounts noted that the assessee has obtained loan of Rs.1,23,00,000/-, in her proprietary concern, M/s. Vijaykumar Associates and Rs.80,50,000/- in her personal capacity, from M/s. Tanvi Construction Co.(P) Ltd.. In response to the show cause notice as to why the deeming provisio....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of balance sheet and the profit and loss account for the year end of 31st March 2007, from which he pointed out that the accumulated profit brought from the last year was only Rs.18,64,751/- and therefore the quantum of disallowance should be restricted to this amount instead of Rs.29,40,933/-. 4. On the other hand, ld. DR strongly relied upon the findings of the CIT(A) and submitted that accumulated profit should also include current year profit. 5. We have heard rival submissions and also perused the relevant material placed on record. The only issue involved before us is the quantum of disallowance which has to be sustained for the purpose of deemed dividend u/s.2(22)(e). From the perusal of the balance sheet and the profit and loss ac....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ITR 382 (Mad) : TC41R.124 took the same view. It analysed the concept of "accumulated profits" and in that connection particularly referred to the observations of Issacs and Rich ii. in Hooper & Harrison Ltd. (In Liquidation) vs. Federal Commissioner of Taxation 35 CLR 458, who relied on Hollis vs. Allan (1866) 14 WR 980 and Sproule vs. Bouch (1885) 29 Ch D 635 (CA) and IRC vs. Blott (1921) 2 AC 171 (HL) where the distinction between current profits and accumulated profits was graphically brought out. The decision of the Madras High Court was affirmed in appeal by this Court in CIT vs. M. V. Murugappan (1970) 77 ITR 818 (SC) : TC41R.121 and it was observed that "....the profits of the year in the course of which the company was order....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r a century. Moreover, this Court in M. V. Murugappan (supra) has also taken the view that current profits cannot be included in accumulated profits. It appears to be now the established law of the land. An attractive submission was raised on behalf of the Revenue that in the Twelfth Report of the Law Commission of India (p. 324, item 17), the authors of the report consider that the intention of the legislature was to include current profits in the expression "accumulated profits" in s. 2(6A) and that the present definition of "accumulated profits" by Expln. 2 to s. 2(22) of the IT Act, 1961, only clarifies what the true intent was all along. In the view which has found favour with us, we are not persuaded by that submission. 6. In view of....