Academic tax reference question became moot after remand; dividend distribution depends on real outgoings and overall finances.

A question referred under section 256(2) of the Income-tax Act, 1961, arising from an order under section 23A of the Indian Income-tax Act, 1922, became academic after the assessment was set aside and remanded for fresh assessment. In that situation, the court declined to answer the reference because no practical controversy survived for determination. The commentary also notes the underlying principle on dividend distribution: it must be assessed by considering the company's real outgoings and overall financial position, rather than business profits alone.

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Issues: Whether the question of law referred under section 256(2) of the Income-tax Act, 1961, arising from an order under section 23A of the Indian Income-tax Act, 1922, survived for consideration after the assessment was set aside and remanded for fresh assessment; and whether the court should answer the referred question on the merits.

Analysis: The assessment for the relevant year had already been set aside and the Income-tax Officer was directed to make a fresh assessment in accordance with law. In that situation, the referred question no longer had practical relevance and became academic. The court nevertheless noted that, on the merits, dividend distribution must be judged in the light of the company's real outgoings and overall financial situation, and not by reference to business profits alone.

Conclusion: The reference had become academic and the court declined to answer the question referred.

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