TaxTMI 
TaxTMI 
1972 (12) TMI 15
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....he general body meeting held on October 12, 1959, it was resolved that no dividend shall be declared for the year ending March 31, 1959. For the year ending March 31, 1960, the company returned a loss of Rs. 18,805 and ultimately the High Court determined the loss when the amount was disputed by the department at Rs. 16,696. Since the assessee had not distributed any dividend the Income-tax Officer called upon the assessee to show cause why additional super-tax should not be levied under section 23A(1) of the Indian Income- tax Act, 1922 (hereinafter called " the Act "). The assessee submitted that after the arrears of tax and the tax due for the year was deducted from the commercial profits only a sum of Rs. 3,228 was available and that th....
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....t. The Tribunal observed that the general body meeting was held on October 12, 1959, that the balance-sheet was drawn up on September 14, 1959, and that therefore the assessee could have anticipated the loss for the accounting year 1959-60 and in fact the assessee returned a net loss of Rs. 18,805 for that year. The Tribunal found that by the time the general body meeting was held the assessee's apprehended loss should have amounted at least to Rs. 9,000 with a prospect of further loss being incurred in the remaining months of the financial year 1959-60, while the distributable profit after deducting the tax for the year and the arrears of tax from the commercial profits amounted to only Rs. 6,337 and that the company could not be said to h....
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.... dividend than that declared would be unreasonable. The section requires all matters relevant to the question of unreasonableness to be considered by the Income-tax Officer while passing an order under section 23A(1). Thus in Commissioner of Income-tax v. Gangadhar Banerjee & Co. the Supreme Court observed : " The reasonableness or unreasonableness of the amount distributed as dividends is judged by business considerations, such as the previous losses, the present profits, the availability of surplus money and the reasonable requirements of the future and similar others. He must take an overall picture of the financial position of the business. It is neither possible nor advisable to lay down any decisive tests for the guidance of the In....
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....s need not be taken into account in determining the available commercial profits of the year because there was the accumulated reserve which exceeded the amount of the loss. In considering this argument, the court said : " In our opinion, that approach was not a proper approach as is required by law. Section 23A requires the losses incurred in the previous year to be taken into consideration in considering the question of reasonableness or otherwise of the distribution of dividend by the company. Whether the losses of the previous year should be adjusted against the profits of the current year or should be adjusted against the reserve is for the businessman to consider. In our opinion, it could not be for the income-tax Officer to direct....
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....f those series of sections which are directed against avoidance of tax. The Income-tax Officer will have to decide the question with reference to the facts and circumstances in each case. The touch stone in all such cases is whether the non-declaration or declaring the dividend less than the statutory percentage of the total income is an attempt at evasion of tax or a prudent action of the directors dictated by the business exigencies of the particular concern. Having regard to these principles, let us go into the facts of this case. As seen above, the commercial profits for the year ended March 31, 1959, was Rs. 19,645. Provision for the taxes for the earlier year and the taxes for the current year amounted to Rs. 3,109 and Rs. 13,308, ....