TaxTMI 
TaxTMI 
2002 (2) TMI 45
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....tent of 90 per cent. of the distributable investment income and 60 per cent. of income relating to business and that the dividend declared by the assessee was not sufficient to meet the statutory conditions for the assessment year 1984-85, the Tribunal was right in cancelling the additional tax levied under section 104 based upon the dropping of proceedings under section 104 by the Assessing Officer for the assessment year 1983-84?" The facts are as follows: The assessee is a company which carries on the business of distribution of motor cars and manufacture and sale of automobile spare parts. It also has income from other sources. The income of the assessee was computed and was later on revised to Rs.8,51,010. While the distributable in....
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....came to the conclusion that the findings written by the assessing authority were correct. On a further appeal before the Income-tax Appellate Tribunal (hereinafter "the Tribunal"), the Tribunal found that the assessee would be well covered under section 109(ii)(3) and more particularly the Explanation thereto. It found that the company had income both from the investments as also from trading. It further deduced that the assessee should have declared the dividend to the extent of 90 per cent. of the distributable income relating to investment and 60 per cent. of the distributable income relating to trading. It recorded a finding that the assessee had not declared sufficient dividend to meet the conditions. However, the Tribunal relying u....
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.... that before the Tribunal it was represented by the assessee that no action was liable to be taken under section 104 particularly because, not to distribute more income was more or the less a business decision. It is clear from the order of the Appellate Tribunal that the assessee had specifically pleaded that during the year its turnover had gone up to Rs.1,417.40 lakhs from Rs.951.50 lakhs for the assessment year 1983-84. However, the business profit during that year had substantially reduced to Rs.3.26 lakhs as against the business profit for the year 1983-84 at Rs.7.19 lakhs. It was also pointed out that the income from other sources had gone up to Rs.9.93 lakhs. It was then pointed that similar situation had arisen in the earlier asses....
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....not be a case where the action under section 104 will be justified and, therefore, the Tribunal was right in taking the view that it took. It seems that the Tribunal has relied upon the judgment of the Supreme Court in CIT v. Gangadhar Banerjee and Co. (Pvt.) Ltd. [1965] 57 ITR 176, where the observations of the Supreme Court are to the following effect: "In deciding whether the payment of a dividend or a larger dividend than that declared by the company would be unreasonable, the Income-tax Officer can take into consideration circumstances other than losses and smallness of profit. The statute, by the words used, while making sure that 'losses and smallness of profits' are never lost sight of, requires all matters relevant to the questi....