9911796707
TMI Blog1984 (2) TMI 202X X X X Extracts X X X X X X X X Extracts X X X X ..... the relevant previous years, that is, within 31-12-1977 for the assessment year 1977-78 and 31-12-1978 for the assessment year 1978-79. But it had declared dividend before the assessment orders were passed. For the assessment year 1977-78 it had declared and paid a dividend of Rs. 2,42,000 on 30-4-1979. For the assessment year 1978-79 it had declared and paid on 16-5-1980 a dividend of Rs. 2,26,875. The assessee argued in vain before the income-tax authorities that in a case where proper dividends were declared and paid before the date of order under section 104, which provision is penal in character, the ITO should desist from passing an order under that section, and argued similar to the finding of the Calcutta High Court in CIT v. Vegetable Products Ltd. [1971] 80 ITR 14 to the effect that unless on the day penalty is being levied some amount of tax remains outstanding or payable by the assessee, no penalty can be imposed at all, and which judgment was later upheld by the Supreme Court in CIT v. Vegetable Products Ltd. [1973] 88 ITR 192. The income-tax authorities held the view that dividend declared after the expiry of 12 months from the end of the accounting year has only to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reopen it, cannot make an assessment in cases where the dividend has actually been declared and paid before the date of his order...." and argued that that proposition expounded by the Supreme Court about the jurisdiction of the ITO will hold the field and the Parliament in the subsequent statutory amendment has left that proposition untouched and undisturbed and that the amendment was only to provide a method for the computation of distributable income in cases where a section 104 order can be lawfully passed by the ITO. However, we are not going into this particular question because we think that this case is governed by the Tribunal decision, where there is reasonable cause for the failure within twelve months. The assessee has various branches and units. So consolidation of accounts has become a difficult task. The assessee has been expressing this great difficulty experienced in the finalisation of accounts even for the year 1972. The assessee had furnished in the paper book a chart about the dates of various events from 1972 onwards like general body meeting, date of directors' report, etc. The assessee had also made available the annual report for years beginning from 197 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld be Rs. 2,74,436 for the assessment year 1977-78 and Rs. 3,12,707 for the assessment year 1978-79. Of course for the assessment year 1977-78 the protection provided under section 105 of the Act is available as the shortfall is within the permitted range of 10 per cent. But the assessee contested the correctness of the working of distributable income. The ITO for the assessment year 1977-78 worked it out as follows: Assessment year 1977-78 (Year ended 31-12-1976) Rs. Rs. 1. Gross total income as per assessment 16,20,225 order 2. Deduction allowed by ITO Less: Income-tax 10,48,943 Disallowances made in the adjustment statement 20,000 Donations 45,000 Bad debts disallowed 34,558 Disallowance under section 40A(8) 14,331 Welfare expenses disallowed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stment account 71,704 Inadmissible disallowed in the adjustment statement not taken into account by ITO 10,000 81,704 ---------- --------- Distributable income: 2,63,781" --------- 9. For the assessment year 1977-78 if the dividend declared should be equal to statutory percentage, the distributable income should be only Rs. 4,03,333 and not Rs. 4,57,393. The assessee wants three more deductions. The gratuity is made up of Rs. 3,52,770 being the gratuity liability to the employees up to 31-12-1976 at the rate of half month's pay for the completed years of service and group gratuity scheme insurance premium actually paid Rs. 15,834, aggregate being Rs. 3,68,604 which was disallowed in income-tax assessment. In our view, all these three deductions claimed are permissible. The first is a statutory obligation. It cannot be said to constitute any part of the income of the assessee. It is taken away by overriding title. It is not a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clared, only the audited accounts were available. The assessments for the years under section 143(3) were only made later. So with a commercial profit of Rs. 18,079 for the assessment year 1977-78, it is clear that no dividend need be declared at all and that in any event payment of larger dividend than that declared would be quite unreasonable. Similarly for the assessment year 1978-79 with a commercial profit of Rs. 2,63,781 declaration of a larger dividend than that declared would be quite unreasonable. It is also not seen that the payment of a dividend or a larger dividend would have resulted in a benefit to the revenue. In other words, as stated in the Tribunal order cited supra there is no detriment to revenue because of the postponement of the declaration of the dividend for this previous year. So the ITO as provided in section 104(2) should not have made an order under clause (i). 12. The question whether the assessee is an industrial company or not, is left open for both assessment years. It is not necessary to decide it for the disposal of these appeals in the manner in which we are doing it. 13. For these reasons stated above, these two appeals are allowed. The order ..... X X X X Extracts X X X X X X X X Extracts X X X X
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