9911796707
TMI Blog1995 (11) TMI 6X X X X Extracts X X X X X X X X Extracts X X X X ..... question referred to it in the affirmative, i.e., in favour of the Revenue. The question referred under section 66(1) of the Indian Income-tax Act, 1922, was " whether, on the facts and in the circumstances of the case, the provisions of section 23A could be applied to the assessee for the assessment year 1960-61 ". The assessment year concerned herein is 1960-61, the accounting year whereof is the year ending on August 31, 1959. The assessee owns a sugar mill and a farm attached to it in what was then the East Paksitan. At the relevant time there were restrictions upon remittances from Pakistan to India. The books of the assessee for the said year showed a profit of Rs. 93,449, after making provision for taxation in India and Pakistan. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 45 of the Income-tax Act were not reasons enough for rejecting the assessee's case. The Tribunal also found that the assessee had incurred substantial liabilities in India in excess of the advances made by it and that the assessee could not have declared the dividends out of its Indian resources. Accordingly, it cancelled the order of the Income-tax Officer made under section 23A of the Income-tax Act. Thereupon, the Revenue asked for and obtained the aforesaid reference. When the reference came up for hearing before the High Court, it appears that no one appeared for the assessee. The High Court heard learned counsel for the Revenue and after referring to section 45 of the Income-tax Act and section 207 of the Companies Act, 1956, held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the previous year, the payment of a dividend or a larger dividend than that declared would be unreasonable ; or (ii) that the payment of a dividend or a larger dividend than that declared would not have resulted in a benefit to the Revenue ; make an order in writing that the company shall, apart from the sum determined as payable by it on the basis of the assessment under section 23, be liable to pay super-tax at the rate of fifty per cent, in the case of a company whose business consists wholly or mainly in the dealing in or holding of investments, and at the rate of thirty-seven per cent. in the case of any other company on the undistributed balance of the total income of the previous year, that is to say, on the total income as r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax Officer, with the previous approval and consent of the Inspecting Assistant Commissioner, will get jurisdiction to make an order if at the time of the passing of the order it is found that the company has distributed by way of dividends within twelve months immediately following the accounting year less than the statutory percentage of its total income of the accounting year as reduced by the amount of taxes payable by the company and in the case of banking companies the amount actually carried to a reserve fund under the statutory compulsion. " It may also be noticed that the provision contained in section 23A is stringent in nature and may have to be construed strictly. The main question in this matter is whether the reasons assign ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the tax collector but from that of a businessman. The yardstick is that of a prudent businessman. The reasonableness or the unreasonableness of the amount distributed as dividends is judged by business consideration, such as the previous losses, the present profits, the availability of surplus money and the reasonable requirements of the future and similar others. He must take an overall picture of the financial position of the business. It is neither possible nor advisable to lay down any decisive tests for the guidance of the Income-tax Officer. It depends upon the facts of each case. The only guidance is his capacity to put himself in the position of a prudent businessman or the director of a company and his sympathetic and objectiv ..... X X X X Extracts X X X X X X X X Extracts X X X X
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