1983 (2) TMI 78 - AT - Income Tax

Summary

Issues:
1. Reduction of additional tax imposed under section 104 of the IT Act, 1961.
2. Interpretation of the Companies (Temporary Restriction On Dividend) Act, 1974.
3. Applicability of the Companies (Temporary Restriction On Dividend) Act, 1974 to the assessee.
4. Jurisdiction of the CIT (A) to decide on the applicability of the Act.

Analysis:
1. The appeal was filed against the CIT (A)'s order reducing the additional tax imposed under section 104 of the IT Act, 1961. The assessee, a Limited Company, failed to declare dividends within the prescribed time, leading to the imposition of additional tax. The CIT (A) reduced the tax from Rs. 20,168 to Rs. 15,842.

2. The assessee contended that it was an industrial undertaking subject to the Companies (Temporary Restriction On Dividend) Act, 1974. The Act restricts dividends to a maximum percentage of paid-up capital. The CIT (A) held that the Act did not apply, focusing on the failure to declare even the permissible 12% dividend, thus dismissing the Act's relevance.

3. The representative for the assessee argued that the Act applied, admitting the default but seeking a reduced tax based on the Act's restrictions. The department's representative supported the CIT (A)'s decision, claiming the new grounds were inadmissible due to requiring investigation into fresh facts.

4. The ITAT considered both parties' contentions and found that the issue of the Act's applicability was crucial. They vacated the CIT (A)'s order and directed a reconsideration of whether the assessee fell under any sub-section of the Companies (Temporary Restriction On Dividend) Act, 1974. The CIT (A) was instructed to make a decision on applicability before finalizing the appeal outcome.

5. The ITAT concluded by partially allowing the appeal for statistical purposes, emphasizing the need for the CIT (A) to determine the Act's applicability to decide on the additional tax liability accurately.