TaxTMI 
TaxTMI 
1965 (12) TMI 37
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....se, section 23A was properly applied? " The relevant facts and circumstances are as follows: The Income-tax Officer, in his order dated February 13, 1957, passed under section 23A, found that the appellant, Gobald Motor Service, hereinafter referred to as the assessee, was a private limited company which ran a fleet of buses and lorries from Mettupalayam in the accounting year relevant to the assessment year 1952-53. He arrived at the following figures in respect of the total income, taxes paid, dividend, etc. : Rs. Total income as finally determined ... 2,04,222 Taxes paid ... 81,529 Balances available for distribution ... 1,22,693 60 per cent. thereof ... 73,617 Dividends declared ... 45,000 On the scrutiny of thes....
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....utory computation, but due to the addition of Rs. 20,000 made on account of luggage collections and to the addition of Rs. 25,000 on account of spare parts, etc. These additions have been sustained by the Appellate Assistant Commissioner. This clearly shows that the books are not so properly maintained as to deduce the distributable income from the assessee company's book profits. Moreover if the additions of Rs. 45,000 are made to the profits of Rs. 20,373 available for distribution, the company could very well have declared a larger dividend than what has been actually declared by it. I, therefore, apply the provisions of section 23A." Accordingly, he held that " the company is deemed to have declared the dividend of Rs. 38,840 to e....
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....issioner and the Income-tax Appellate Tribunal. The Appellate Assistant Commissioner found on analysis that the difference of nearly a lakh of rupees between the total income as finally determined, namely, Rs. 2,04,222 and the book profits amounting to Rs. 1,01,902 was principally due to the following additions made in the assessment : Rs. (a) Spare parts, tyres, tubes, etc. ... 25,000 (b) Suppression of luggage collections ... 15,000 (c) Difference between depreciation allowed and claimed ... 34,906 The Appellate Assistant Commissioner held that the expenditure on spare parts had probably been inflated and the luggage collections of Rs. 15,000 had entirely been kept out of accounts. He further observed that " at the ti....
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.... entitled to conclude that it would not have been unreasonable for the assessee to have declared a dividend larger than that which had actually been declared. In the result the High Court answered the question in the affirmative and against the assessee. Mr. Srinivasan raised two contentions before us : first that the additions in respect of luggage collections and expenditure on spare parts, tyres, tubes, etc., disallowed should not be added to the book profits because they represent only notional income. We are unable to agree to this contention. The commercial or accounting profits which have to be taken into consideration are the real commercial or accounting profits. If an item is deliberately omitted from the accounts, it cannot....
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....s or to the smallness of the profits made, the payment of a dividend or a larger dividend than that declared would be unreasonable." He further urged before us that this court had held in Commissioner of Income-tax v. Gangadhar Banerjee & Co. that the burden lay upon the revenue to prove-that all the conditions laid down in section 23A were satisfied before the order was made, and he said that one of the conditions was that the Income-tax Officer, after having examined the question, was satisfied that having regard to the losses incurred by the company in earlier years or to the smallness of the profits made the payment of a dividend or a larger dividend than that declared would not be unreasonable. He further relied on the following observ....
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....e Income-tax Officer did not consider the question like a prudent businessman. But, as we have already said, the assessee did not raise this point either before the Appellate Assistant Commissioner or the Appellate Tribunal. If this point had been raised, the facts relating to the considerations mentioned in the observations of Subba Rao J. would have been brought on the record. We feel that it is now too late to permit him to raise this point. Further, it appears from the judgment of the High Court that the assessee's contention before it was that the expression " profits made " in section 23A refers to profits disclosed by the accounts and further to the profits that were made only during that year, disregarding any profits of the previou....