Commercial profits under section 23A exclude capital loss from profit computation, while dividend feasibility may still consider financial strength.

Section 23A requires commercial profits to be determined independently of book profit by considering the true nature of receipts and outgoings. A capital loss does not reduce commercial profits for this purpose, although it may be relevant when assessing whether a larger dividend could reasonably have been declared. The company's reserves, cash and bank balances, and overall financial position may also be weighed in testing dividend feasibility. On this approach, invocation of section 23A was treated as justified and consistent with law.

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Issues: Whether the invocation of section 23A was justified, particularly on the basis of commercial profits, the treatment of capital loss, and the feasibility of declaring a larger dividend.

Analysis: The basis for applying section 23A is not confined to the book profit shown in the accounts; commercial profits must be ascertained by considering the true nature of receipts and outgoings. A capital loss does not reduce commercial profits for the purpose of section 23A, though it remains relevant when judging whether a larger dividend could reasonably have been declared. The Tribunal had taken into account the company's reserve position, cash and bank balances, and overall financial soundness along with the capital loss in deciding feasibility.

Conclusion: The invocation of section 23A was justified and in accordance with law, and the answer was against the assessee.

Ratio Decidendi: For the purpose of section 23A, commercial profits must be determined independently of the assessee's book profit, and a capital loss does not go to reduce commercial profits, though it may be considered at the stage of testing the reasonableness of declaring a larger dividend.

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