1972 (5) TMI 8

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....ore the passing of the order under section 23A on the assessee-company?" The assessment year is 1960-61. The relevant accounting year ended on August 31, 1959. The assessee is a private limited company incorporated on June 26. 1956. Its total income for the relevant year was determined at Rs. 24,997 and the tax thereon amounted to Rs. 11,249. That left, a distributable surplus of Rs. 13,748. No dividend was declared within 12 months immediately following the expiry of the previous year for the relevant assessment year. A meeting of the general body of the shareholders took place on November 5, 1960, and a sum of Rs. 10,000 was distributed as dividend. This distribution having been made beyond the statutory period of 12 months, the Income....

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....ion was duly complied with. The income-tax department being aggrieved by the said order preferred an appeal to the Income-tax Appellate Tribunal but the appeal was dismissed. The Tribunal further observed that the purpose of section 23A was to discourage companies from keeping back the profits in the shape of reserves or such other things, which should have been distributed as dividends to the shareholders. Where, therefore, a dividend had actually been distributed, although not up to the mark as laid down under the section, to that extent the company had distributed the dividend and necessarily, therefore, the penalty in the shape of super-tax for non-distribution of the statutorily distributable surplus as laid down under the section m....

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....f profits on a company is subject to the following cumulative conditions. The company should have distributed by way of dividends within 12 months following the expiry of the accounting year less than the statutory percentage of its total income of the accounting year as reduced by the amount of taxes payable by the company and in the case of banking companies the amount actually carried to a reserve fund under statutory compulsion. The Income-tax Officer should not make an order under this section if he is satisfied that having regard to (a) the losses incurred by the company in earlier years or (b) the smallness of the profits made in the accounting year, the payment of a dividend or a larger dividend than that declared would be unreas....