1979 (3) TMI 44 - HC - Income Tax

High Court rules on Indian Income Tax Act application, overturns Tribunal decision.

Commissioner Of Income-Tax, Bombay City II Versus Rawji Amarsi And Sons India Pvt. Limited

Commissioner Of Income-Tax, Bombay City II Versus Rawji Amarsi And Sons India Pvt. Limited - [1979] 119 ITR 112, 10 CTR 209, 2 TAXMANN 251 Issues Involved1. Applicability of Section 23A(1) of the Indian Income Tax Act, 1922.2. Inclusion of Rs. 75,744 in the assessee's income.3. Validity of joint venture claim with Naraindas Bhimji.4. Consideration of commercial profits for dividend distribution.Detailed Analysis1. Applicability of Section 23A(1) of the Indian Income Tax Act, 1922The primary issue was whether the provisions of Section 23A(1) of the Indian Income Tax Act, 1922, were applicable to the assessee-company. The Income Tax Officer (ITO) determined that the assessee had not distributed the statutory minimum dividend and thus levied an additional super-tax. The Appellate Assistant Commissioner (AAC) upheld the ITO's order, finding that the assessee had no evidence of a joint venture with Naraindas Bhimji and had agreed to include Rs. 75,744 in its income. The Tribunal, however, found the amount to be disputed and thus not part of commercial profits. The High Court ultimately held that the Tribunal's decision was incorrect, as there was no material evidence of a joint venture or dispute over the amount.2. Inclusion of Rs. 75,744 in the Assessee's IncomeThe ITO included Rs. 75,744, claimed by the assessee to be half of the joint venture profits with Naraindas Bhimji, in the assessee's total income. The AAC found no evidence of the joint venture and noted that the amount was transferred to the assessee's reserves. The Tribunal accepted the assessee's claim that the amount was disputed. However, the High Court found no evidence of a dispute or joint venture, emphasizing that the assessee had conceded to the inclusion of the amount in its income before the ITO.3. Validity of Joint Venture Claim with Naraindas BhimjiThe assessee claimed that Rs. 75,744 represented half of the profits from a joint venture with Naraindas Bhimji. The AAC found no evidence of such a joint venture, and this amount was eventually transferred to the assessee's reserves. The Tribunal accepted the joint venture claim based on the entries in the assessee's accounts. However, the High Court scrutinized the documents and found no evidence of any joint venture or dispute with Naraindas Bhimji, concluding that the Tribunal's acceptance of the joint venture claim was unfounded.4. Consideration of Commercial Profits for Dividend DistributionThe assessee argued that after considering past losses and tax provisions, no commercial profits were available for dividend distribution. The ITO and AAC disagreed, including Rs. 75,744 in the commercial profits. The Tribunal excluded this amount, considering it disputed. The High Court, however, found no evidence supporting the dispute or joint venture, thus including the amount in the commercial profits. The court emphasized that the entries in the account books alone could not establish the existence of a joint venture or a dispute.ConclusionThe High Court concluded that the provisions of Section 23A(1) were applicable to the assessee-company. It found no evidence of a joint venture or dispute over the amount of Rs. 75,744, which was rightfully included in the assessee's income and commercial profits. The Tribunal's decision was set aside, and the AAC's order was upheld. The question referred to the court was answered in the negative and against the assessee, who was ordered to pay the costs of the reference.