TaxTMI 
TaxTMI 
TaxTMI 
1973 (7) TMI 49
X X X X Extracts X X X X
X X X X Extracts X X X X
....f the Indian Income-tax Act, 1922, and the application of the said section was in accordance with law ?" For the assessment year 1956-57, the corresponding accounting year of which is 1955-56, the assessee-company returned an income of Rs. 94,602. This income was accepted and total taxes amounting to Rs. 41,093 were imposed. After the payment of taxes, according to the income returned and assessed, a surplus of Rs. 53,509 remained in the hands of the company for declaring and distribution of dividend. No dividend at all was declared by the company. Similarly, in respect of the assessment year 1957-58, the company returned an income of Rs. 32,900. The Income-tax Officer assessed it at Rs. 35,873. The amount of tax levied was Rs. 18,475. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r has to judge the question of payment of a dividend or a larger dividend not only taking into consideration the losses incurred by the company in the earlier years and/or to the smallness of the profits made in the previous year but also other relevant facts and circumstances. This decision has been followed and the principles laid down by the Privy Council have been approved by the Supreme Court in several decisions; mention may be made of only two--Commissioner of In come tax v. Gangadhar Banerjee & Co. and Commissioner of Income-tax v. Asiatic Textiles Ltd. The hon'ble judges of the Supreme Court in the two decisions just referred to have pointed out that the Income-tax Officer has to view the various aspects of the matter not with an a....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... v. Commissioner of Income-tax, a decision of the Calcutta High Court; and Commissioner of Income-tax v. Avon Cycles Private Ltd., a judgment of the Punjab High Court. In the instant case, although it would appear from the records that in the profit and loss account the assessee-company had debited larger sums on account of depreciation than the ones which werpermissible under the law, the order against the company under section 23A does not rest on this ground. I shall, therefore, leave it out of consideration. From the order of the Tribunal is also from the copies of the balance-sheet attached as annexures to the statement of the case it would appear that the paid up capital of the company was Rs. 2,50,000. On various accounts the total s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ot right in his submission that the commercial profits was Rs. 29,635 only and not Rs. 74,635, as mentioned in the appellate order of the Tribunal. In the accounting year corresponding to the assessment year 1957-58 the position of commercial profit apparent on the profit and loss account is not very clearly mentioned in the balance-sheet appended to the statement of the case. Nonetheless, sufficient items of figures were there from which the figure of Rs. 25,041 mentioned in the order of the Tribunal could be found out. It may be stated here that Sri R. S. Chatterji did not contest the correctness of this figure mentioned in the order of the Tribunal. The remainder of the profit and loss account in the accounting year corresponding to th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r deciding the question of the reasonableness of the assessee's action in relation to the payment of dividend the question of losses in the subsequent period is not relevant. Learned counsel further submitted that there were many types of business expenditure there were heavy loans on the company and replacement of the machineries were necessary. The Tribunal has referred to the sound financial position of the company even with reference to heavy loans. It is pointed out that annual interest were being credited in the accounts of the creditors. No payment was ever made. They were, therefore, long-term loans and to all intents and purposes would be treated as the capital of the company. No expenditure was made in the two years in questio....