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Issues:
Challenge to orders passed by Central Board of Direct Taxes and Income-tax Officer under sections 107A and 104 of the Income-tax Act, 1961. Analysis: The petitioner, a film distribution and exhibition company, was required to distribute 90% of its distributable income as dividend. Despite having distributable income of Rs. 2,18,016, the company distributed only Rs. 1,69,964, falling short by Rs. 26,251. The Income-tax Officer issued a notice under section 104 asking for an explanation. The company had earlier applied to the Central Board of Direct Taxes for a reduction in the minimum distribution, citing development needs. The Board rejected the application, leading to additional tax levied by the Income-tax Officer. The petitioner argued that the burden lies on the Revenue to prove the dividend declared was unreasonable. They contended that the commercial profits, not assessable income, should be considered for dividend declaration. The company had undertaken significant renovation projects and new cinema hall constructions, requiring substantial funds, justifying the lower dividend declaration. The Supreme Court precedent highlighted that the Income-tax Officer must consider business factors like previous losses, present profits, and future requirements in assessing dividend reasonableness. The court found that the Income-tax Officer's order was non-speaking and did not demonstrate a consideration of relevant factors or compliance with Supreme Court guidelines. The Department's argument against the maintainability of the petition under article 226 was rejected due to the appeal bar under section 107A(9). The court criticized the Department for not filing a counter-affidavit despite ample opportunities and failing to produce necessary records during proceedings. Ultimately, the court quashed the impugned orders, holding that the Income-tax Officer had not properly applied his mind to the case as required by law. In conclusion, the court ruled in favor of the petitioner, quashing the orders passed by the Central Board of Direct Taxes and the Income-tax Officer. Each party was directed to bear their own costs.
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