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Issues:
1. Interpretation of section 23A of the Indian Income-tax Act, 1922 regarding the applicability of higher statutory percentage on a company. 2. Determination of whether a company's business primarily consists of dealing in or holding investments based on the activities and income sources of the company. Analysis: The judgment by the High Court of Calcutta involved a reference under section 66(1) of the Indian Income-tax Act, 1922, initiated by the Commissioner of Income-tax, Calcutta, against a company, the assessee, for assessment years 1959-60, 1960-61, and 1961-62. The issue revolved around whether the company's business primarily involved dealing in or holding investments, triggering the provisions of section 23A of the Act. The assessee, a company not substantially interested by the public, earned income from shares in other companies and interest on deposits with its allied concerns. The Income Tax Officer (ITO) issued notices under section 23A to the assessee for not meeting the statutory percentage of dividend declaration. The assessee contended that its deposits were not investments and its business did not primarily consist of dealing in investments. The AAC held in favor of the assessee, emphasizing that the cash deposits were not investments and the company's primary business did not involve investments. The Revenue appealed to the Income-tax Appellate Tribunal, reiterating their stance that the company's activities constituted dealing in investments. The Tribunal upheld the AAC's decision, stating that the cash deposits were not investments and the company's business did not primarily involve investments. The Tribunal then referred a question to the High Court regarding the company's classification under section 23A. The High Court, in its analysis, considered the company's systematic and organized activity of earning profits from shares and interest-bearing deposits. Citing relevant case laws, the Court emphasized that the term "investment" should be understood in its popular sense and that the company's activities aligned with the definition of a company primarily dealing in or holding investments. Therefore, the Court concluded that the company fell within the purview of section 23A, and the question was answered in favor of the Revenue. In a concurring opinion, Justice D. K. Sen agreed with the analysis and decision of the Court. The judgment highlighted the importance of interpreting the provisions of the Income-tax Act in line with the company's actual business activities and income sources to determine the applicability of statutory requirements under section 23A.
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