1989 (9) TMI 20

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.... of law referred to this court at the instance of the Revenue reads thus : "Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the sum of Rs. 5,40,000 being the amount of dividend declared from the general reserve of Rs. 50,65,750, was includible in computing the capital for the purpose of statutory deduction under the Companies (Profits....

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....hat year. Even when the accounts were finalised and the directors made their report to the shareholders, the directors could only make a recommendation for distribution of dividend which. recommendation might or might not be accepted by the general body of shareholders. It was only when the general body accepted the recommendation that the liability for payment of dividend would arise and not at a....

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....ly) per share of Rs. 100 each fully paid up subject to deduction of tax at appropriate rates. After your sanction, the dividend amounting to Rs. 5,40,000 will be paid out of the general reserve and hence no separate provision has been made therefor." (underlining by us). It is evident that the recommendation does not even remotely suggest that the dividend amounting to Rs. 5,40,000 recommended ....

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.... current income rather than from past savings. Unless the directors in their report expressly or specifically state that the payment of dividend is to be made from past savings, the general reserve will have to be reduced by the amount of dividend distributed. We have already referred to the balance-sheet of the company to show that the directors in their report have merely stated that the dividen....