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Issues: Whether, for the purpose of section 23A(1) of the Income-tax Act, 1922, dividend declared after the expiry of the 12-month period but before the Income-tax Officer passed the order could be taken into account in determining whether the company had failed to distribute the requisite dividend.
Analysis: The assessment year was 1961-62 and the company declared dividend beyond the 12-month period but before the Income-tax Officer made the order under section 23A(1). The controlling principle was that, in computing the undistributed balance for levy of super-tax under section 23A(1), dividend declared by the company before the date of the order had to be considered, even if declaration occurred after the statutory 12-month period. On that basis, the premise that the company had incurred automatic liability merely because the declaration was belated was unsustainable.
Conclusion: The question was answered in the negative and in favour of the assessee. The order under section 23A(1) was not valid.
Final Conclusion: Dividend declared before the section 23A(1) order could not be ignored merely because it was made after the 12-month period, and the reference was disposed of accordingly.
Ratio Decidendi: For section 23A(1) of the Income-tax Act, 1922, dividend declared by a company before the Income-tax Officer passes the order must be taken into account in determining the undistributed balance, even if the declaration is made after the expiry of the 12-month period following the previous year.
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