Section 23A applies on assessed commercial results, not rejected book losses, when judging distributable profits and earlier losses.

For invoking section 23A, earlier losses had to be tested against the real commercial results reflected in the accepted assessments, not the rejected book losses. Where the books were properly rejected and the assessee accepted estimated assessments for earlier years, the book figures did not show the true profit position. The assessed figures, including additions made in those years, were therefore relevant to decide whether any genuine losses remained to be carried forward against later profits. On that basis, rejected book losses could not be relied on to resist section 23A; the levy of additional super-tax was upheld.

---

---

Issues: Whether, for invoking section 23A, the earlier years' book losses or the losses as determined in the completed assessments had to be taken into account in judging the availability of distributable profits in the later years.

Analysis: Section 23A requires the Income-tax Officer to consider whether the non-distribution of dividends was unreasonable having regard to the losses of earlier years and the smallness of profits. The decisive question was whether the assessee could rely on book losses when those losses had not been accepted in the completed assessments for the earlier years. The Court held that where the books were rejected for valid reasons and the assessee accepted the estimated assessments, the book results did not represent the real commercial position. In such a situation, the assessed figures, including additions made in the earlier years, were relevant for determining whether any real losses existed to be carried forward against later profits.

Conclusion: The earlier assessed figures, and not the rejected book losses, had to be taken into account. The levy of additional super-tax under section 23A was justified.

Ratio Decidendi: For the purpose of section 23A, the existence of earlier losses must be judged on the basis of the real commercial results disclosed by the accepted assessment findings, and rejected book losses cannot be relied on to defeat a valid invocation of the provision.

---