Case Law Details
XL Enterprises Ltd. Vs ITO (ITAT Kolkata)
Undisputed facts are that the assessee has taken advance of Rs. 8,58,26,789/- from P N Memorial Neurocentre & Research Institute Ltd. in which it was holding 17.94% of equity shares. Out of said amount of total advance , a sum of Rs. 4,02,43,658/- was coming from earlier year as opening balance whereas Rs. 4,55,83,131/- was received during the year. The assessee has accumulated profit as per the books of account maintained in consonance with Companies Act as on 31.03.2012 of Rs. 12,42,02,096/-. We note that the Ld. CIT(A) partly allowed the appeal of the assessee by deleting the addition to the extent of Rs. 4,02,43,658/- which represented the opening balance received in earlier year however sustained the addition partly in respect of that amount received during the year of Rs. 4,55,83,131/-. Now the assessee has taken an argument before us that the accumulated profits as per the Companies Act are not the correct accumulated profits to be considered for the purpose of Section 2(22)(e) of the Act. The Ld. A.R. submitted that the correct accumulated profits have to be ascertained after making necessary adjustments towards depreciation as per Income Tax Act.
In the instant case before us, we observe that in case the depreciation as per Income Tax Act is taken into account then the accumulated profits of the assessee would be working out to be in negative meaning thereby that there are no accumulated profits for the purpose of Section 2(22)(e) of the Act. In the aforesaid decisions it has been held that the accumulated profits have to be arrived at after allowing depreciation as per the Act and not as per Companies Act. Accordingly, respectfully following the various decisions, we set aside the order of Ld. CIT(A) and direct the AO to delete the addition of disallowance.
FULL TEXT OF THE ORDER OF ITAT KOLKATA
This is the appeal preferred by the assessee against the order of the Ld. Commissioner of Income Tax (Appeals)-4, Kolkata (hereinafter referred to as the Ld. CIT(A)”] dated 19.08.2019 for the AY 2012-13.
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