[Deemed Dividend] Accumulated Profits Of Company U/S 2(22)(e) Of Income Tax Act Are Computed After Adjusting Depreciation: Telangana HC

The Telangana High Court reiterated that accumulated profits of a company for the purpose of deemed dividend under Section 2(22)(e) of the Income Tax Act should be computed after adjusting for depreciation. The case involved a taxpayer who received loans from a company in which he held substantial interest. The assessing officer had treated the loans as deemed dividends without adjusting for depreciation in the company’s accumulated profits. The court held that depreciation must be considered to accurately determine the accumulated profits and the applicability of deemed dividend provisions. This decision underscores the importance of accurate profit computation in tax assessments.