TaxTMI 
TaxTMI 
1979 (10) TMI 5
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....r 1959-60 (the relevant previous year being the year ended March 31, 1959) on a total income of Rs. 43,407. Thereafter, the ITO came to know that the assessee had been withdrawing moneys from the company, and in the belief that those amounts were liable to be treated as " dividend " under s. 2(6A)(e) of the Indian I.T. Act, 1922, he reopened the assessment by virtue of s. 147 of the I.T. Act, 1961. In the assessment proceedings which followed, the assessee claimed that the accumulated profits of the company amounted to Rs. 1,050 only, and that amount alone could be considered as " dividend " under s. 2(6A)(e). The figure was worked out on the basis that a sum of Rs. 11,000 as a provision for tax and of Rs. 6,900 as a provision for dividend had to be adjusted against the balance of Rs. 18,950 in the profit and loss account. The ITO rejected the contention of the assessee and determined a sum of Rs. 25,107 as dividend under s. 2(6A)(e). He arrived at this figure by including the current profits of the company for the account year ending March 31, 1959. The AAC dismissed an appeal filed by the assessee. The Income-tax Appellate Tribunal, in second appeal, upheld the claim of the asses....
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....) by way of advance or loan to a shareholder or any payment by any such company on behalf or for the individual benefit of a shareholder, to the extent to which the, company in either case possesses accumulated profits." The question is whether the profits earned by the company during the year in which the loans were advanced to the assessee, that is to say, the year current profits, can be regarded as included within the accumulated profits of the company. It will be noticed that the expression " accumulated profits " occurs in s. 2(6A)(c) of the Act. Construing that clause in Girdhardas & Co. Ltd. v. CIT [1957] 31 ITR 82, 88, the Bombay High Court said : " The limitation imposed by the legislature is that the profits must in the first place be accumulated in contradistinction to the profits being current ........" The Madras High Court in CIT v. M. V. Murugappan and CIT v. A. M. M. V. Valliammai Achi [1966] 62 ITR 382 took the same view. It analysed the concept of " accumulated profits " and in that connection particularly referred to the observations of Issacs and Rich JJ. in Hooper & Harrison Ltd. (In Liquidation) v. Federal Commissioner of Taxation (35 CLR 458, 480) who rel....
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....pression " accumulated profits " in s. 2(6A) and that the present definition of " accumulated profits " by Expln. 2 to s. 2(22) of the I.T. Act, 1961, only clarifies what the true intent was all along. In the view which has found favour with us, we are not persuaded by that submission. Accordingly, we hold that the High Court was right in answering the first question in favour of the assessee and against the revenue. The second question is whether the provision for payment of tax and dividend can be taken into account when computing the accumulated profits as on March 31, 1958. The revenue contends that this question should not have been referred by the Appellate Tribunal to the High Court at the instance of the assessee because no reference application was made by the assessee. The only reference application, it is pointed out, before the Appellate Tribunal was the reference application filed by the CIT. We are of opinion that the revenue is right. The objection was taken by the revenue before the Appellate Tribunal when the statement of case was being prepared, but the Appellate Tribunal overruled the objection, relying on Girdhardas & Co. Ltd. v. CIT [1957] 31 ITR 82 (Bom). It....
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.... in the non-applicant (a phrase used here for convenience) to ask for a reference of questions of law on the application made by the applicant. In this connection, two categories of cases can be envisaged. One consists of cases where the order of the Tribunal under s. 254 has decided the appeal partly against one party and partly against the other. This may be so whether the appeal consists of a single subject-matter or there are more than one independent claim in the appeal. In the former, one party may be aggrieved by the grant of relief, even though partial, while the other may be aggrieved by the refusal to grant total relief. In the latter, relief may be granted or refused with reference to individual items in dispute, and accordingly one party or the other will be aggrieved. In either case, the party who is aggrieved and who desires a reference to the High Court must file a reference application for that purpose. It is not open to him to make a reference application filed by the other party the basis of his claim that a question of law sought by him should be referred. The second category consists of cases where the order made by the Appellate Tribunal under s. 254 operates ....