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Issues: Interpretation of the term "smallness of the profit made" in section 23A(1) of the Income-tax Act.
Detailed Analysis: The case involved the interpretation of the term "smallness of the profit made" in section 23A(1) of the Income-tax Act. The assessee, a private limited company, had income from various sources such as business, interest on securities, property, and dividends. The Income-tax Officer determined the assessable income of the company and applied section 23A(1) due to the company not declaring a dividend. The key question was whether the term "smallness of the profit made" in section 23A(1) referred only to profits derived from business assessable under section 10 or included income from other sources like interest on securities, property, and dividends assessable under different sections. The Tribunal, relying on a previous court decision, held that the term "profit" in section 23A(1) encompassed the entire profit made by the company, not limited to business profits. The court noted that the previous case relied upon did not directly address the specific question at hand. The court further highlighted that the objective of section 23A(1) was to prevent unreasonable withholding of profits from distribution as dividends, focusing on actual distributable profits rather than notional income. The court analyzed the language of section 23A(1) and emphasized that the term "profit" in the context of "smallness of the profit made" encompassed all profits of the company available for distribution as dividends, not restricted to business profits alone. The court rejected the argument that the term "profit" should be limited to business profits based on the wording of the section and the legislative intent. Ultimately, the court answered the question in the negative regarding the interpretation of the term "smallness of the profit made" and affirmed the broader understanding of profit for the application of section 23A(1). In conclusion, the court's detailed analysis clarified that the term "profit" in section 23A(1) should be interpreted broadly to include all distributable profits of the company from various sources, not solely limited to business profits. The decision provided a comprehensive interpretation of the legislative intent behind the provision and emphasized the importance of considering the entire fund available for distribution when assessing compliance with section 23A(1).
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