02 September 2011
Emphasis is on ‘possessing’ accumulated profits - Payments made by way of loan or advance to a shareholder or any payments made on behalf or for the benefit of a shareholder are to be treated as dividend in either case to the extent to which the company possesses accumulated profits. The emphasis in this connection must be on-the word ‘possesses’. If the company does not possess the amount, it cannot pay the same. A company can be said to have profits or to be possessed of profits when it actually possess the amount or is in its control - R. Dalmia v. CIT [1982] 133 ITR 169 (Delhi
Dear Sir,
Does a company whose investment in fixed asset is more than the total of the paid up capital and its accumulated profits is said to possess accumulated profits for considering any payment made to substantial shareholder as deemed dividend
04 September 2011
No it all depends on the distributable profit. Whatever amount is invested does not matter. The investment can be met from loans and other reserved. Capital reserve shall also not be available for 2(22)(e).
If you have any specific case in your hand you can refer to me at ssunderagarwal@gmail.com
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