Commercial profits govern section 23A application, and concealed receipts remain part of real distributable profits.

Section 23A(1) of the Indian Income-tax Act, 1922 applies by reference to a company's commercial or accounting profits, not merely its assessable income. Concealed receipts omitted from the books nevertheless form part of real commercial profits, because they cannot be excluded from the prudent businessman's overall view of financial position. The provision must be applied on that commercial basis, and even on the assessee's depreciation claim in full, the Tribunal found sufficient distributable profits to justify section 23A(1). The reference was answered in favour of the Revenue.

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Issues: Whether section 23A(1) of the Indian Income-tax Act, 1922 was rightly applied to the assessee, including whether concealed receipts had to be included in commercial profits and whether the depreciation basis affected the applicability of the provision.

Analysis: For the purpose of section 23A(1), the relevant figure is the company's commercial or accounting profits and not merely its assessable income. Amounts earned by the assessee but omitted from the books remained part of its real commercial profits, because a businessman cannot exclude concealed receipts from commercial profits. The determination under section 23A must be made from the standpoint of a prudent businessman and on an overall view of the financial position. Even assuming the assessee's depreciation claim in full, the Tribunal's finding showed that the available commercial profits still justified the application of section 23A(1).

Conclusion: Section 23A(1) was rightly applied, and the reference was answered in favour of the Revenue.

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