Mandatory dividend distribution period controls super-tax computation; late payment cannot reduce the undistributed surplus.

Section 23A(1) of the Indian Income-tax Act, 1922 requires dividend distribution within 12 months after the close of the previous year, and that time limit is mandatory. Dividend distributed after expiry of that statutory period cannot be treated as compliance with the provision or deducted from the distributable surplus when computing liability to super-tax. The tax consequence therefore follows on the entire undistributed surplus, because the words "dividends actually distributed" do not override the express temporal requirement in the section.

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Issues: Whether, for the purpose of section 23A(1) of the Indian Income-tax Act, 1922, dividend actually distributed after the expiry of the prescribed 12-month period could be deducted from the distributable surplus while computing the super-tax liability.

Analysis: Section 23A(1) fixes a specific time for distribution of dividends, namely within 12 months immediately following the expiry of the previous year. The provision is mandatory and operates where the company has failed to distribute the statutory percentage within that period. Dividend distributed after the statutory period does not satisfy the requirement of distribution within time, and the words "dividends actually distributed" cannot be read to ignore the time limit expressly provided by the section.

Conclusion: The dividend declared after the statutory period could not be deducted from the distributable surplus, and super-tax was chargeable on the entire undistributed surplus. The question was answered against the assessee and in favour of the Revenue.

Ratio Decidendi: Where a taxing provision prescribes a mandatory time limit for distribution of dividends, only dividends distributed within that period can be treated as compliance for computing the undistributed balance subject to additional super-tax.

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