1982 (4) TMI 10 - HC - Income Tax

Summary

Issues:
1. Computation of distributable surplus for additional super-tax under section 23A of the Income Tax Act.
2. Consideration of tax actually assessed versus tax estimated for determining distributable surplus.
3. Application of principles from previous court judgments in similar cases.

Analysis:
1. The case involved the computation of distributable surplus for additional super-tax under section 23A of the Income Tax Act. The Assessing Officer (AO) had initially included cash credits and suppressed sales in the total income of the assessee, resulting in a higher tax liability. However, the Appellate Assistant Commissioner (AAC) reduced the total income, leading to a lower tax liability and distributable surplus. The Tribunal further analyzed the commercial profits and tax imposed by the AO to determine a distributable surplus of nil, which was contested by the Revenue.

2. The main issue revolved around whether the tax actually assessed or the tax estimated should be considered for calculating the distributable surplus. The Revenue argued that the tax assessed by the AO should be the basis, as it reflects the true commercial profits. Citing the Supreme Court's judgment in CIT v. Gangadhar Banerjee and Co. (P.) Ltd., it was established that the actual tax assessed should be deducted from commercial profits to ascertain the distributable surplus. The Tribunal's decision to consider the tax actually assessed by the AO was upheld, as it aligned with established legal principles.

3. The application of principles from previous court judgments played a crucial role in the decision. Reference was made to the case of Gobald Motor Service (P.) Ltd. v. CIT to emphasize that additions made by the AO on account of suppressed profits should be considered in determining commercial profits. Additionally, the judgment in CIT v. Sahibganj Electric Cables P. Ltd. was distinguished as it did not apply to the specific issues in the present case. Ultimately, the Tribunal's decision to reject the order under section 23A was deemed valid, as the AO failed to prove the non-distribution of required dividends and relied solely on the assessment order without establishing suppression of profits.

In conclusion, the High Court upheld the Tribunal's decision, affirming that the tax actually assessed by the AO should be deducted from commercial profits to calculate the distributable surplus for additional super-tax under section 23A. The judgment highlighted the importance of considering established legal principles and previous court rulings in resolving tax-related disputes.