Court affirms Tribunal's decision on income tax provisions, settles undisclosed profits inclusion dispute.

The court upheld the Tribunal's decision regarding the interpretation of provisions of section 104 of the Income Tax Act for the assessment years 1965-66 and 1966-67. It affirmed the inclusion of settled income from undisclosed profits for determining distributable income, rejecting the assessee's argument against considering such income. The court emphasized the need to adhere to commercial principles and established legal precedents, ultimately ruling in favor of the revenue authorities and upholding the additional super-tax levied under section 104.

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Issues:
1. Interpretation of provisions of section 104 of the Income Tax Act for assessment years 1965-66 and 1966-67.
2. Justification of additional super-tax levied under section 104.
3. Consideration of undisclosed income for determining available surplus for dividend distribution.
4. Application of settled income under section 271(4A) for assessing distributable income.
5. Compliance with the provisions of section 104 regarding dividend declaration timelines.
6. Relevance of new contentions not raised before lower authorities.

Analysis:
1. The case involved references under section 256(2) of the Income Tax Act, 1961, regarding the applicability of section 104 for the assessment years 1965-66 and 1966-67. The company, being a private limited company, had earned income from the sale of import entitlements not accounted for in the books, leading to a settlement under section 271(4A) admitting the undisclosed income. The Income Tax Officer (ITO) made orders under section 104 determining the distributable income and levying additional super-tax for both years.

2. The Appellate Authorities upheld the ITO's actions, considering the undisclosed income brought into the books post-settlement. The Tribunal rejected the appeals, emphasizing the need to include the undisclosed profits for determining the available surplus. The Tribunal's decision aligned with the commercial principles outlined in previous Supreme Court judgments.

3. The Tribunal's findings indicated that the undisclosed profits from the sale of import entitlements, later included in the books, should be considered for determining the distributable income. The Tribunal applied the principle that deliberately concealed income must be included in commercial profits, as established in previous Supreme Court decisions.

4. The assessee contended that the settled income should not be considered for determining distributable income, arguing the settlement was for peace and not reflective of actual profits. However, the court highlighted the importance of including such income, especially when subsequently brought into the books, as observed in previous case laws.

5. The court addressed the contention regarding the timeline for declaring dividends, emphasizing that new arguments not raised before lower authorities cannot be entertained at a later stage. Citing precedent, the court held that such belated contentions cannot be considered, affirming the Tribunal's decision based on the facts presented.

6. Ultimately, the court upheld the Tribunal's decision, affirming the applicability of section 104 and the inclusion of settled income for determining distributable surplus. The judgment favored the revenue authorities, emphasizing the importance of adhering to commercial principles and established legal precedents in tax assessments.

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