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TMI Blog1967 (7) TMI 50X X X X Extracts X X X X X X X X Extracts X X X X ..... ome-tax Appellate Tribunal : " Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that no order under section 23A should have been made for the three years in question in view of the fact that the non-trading loss of Rs. 6,88,000 was not wiped off in the accounts ? " The reference relates to the assessment years 1955-56, 1956-57 and 1957-58, the corresponding previous years being the financial years ending on 31st March, 1955, 31st March, 1956, and 31st March, 1957, respectively. The assessee is a public limited company and it is admitted that it is not a company in which the public are substantially interested within the meaning of section 23A(9). It owns a large number of house properties ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reby making excess provisions for such depreciation. In this opinion, if proper depreciation was charged in the accounts, this loss would have been wiped out earlier. He, therefore, passed orders under section 23A imposing additional super-tax on the company on the amounts of the distributable surplus aforesaid. The Appellate Assistant Commissioner, on appeal by the assessee from the orders under section 23A, confirmed the Income-tax Officer's orders with the following observation : " In this particular case as already mentioned there is a capital loss of Rs. 6,88,000 incurred for the assessment year 1941-42. The question for consideration is whether this loss is to be taken into account while considering the expression ' having regard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wing observation : " Now, the question before us is as to whether that loss should be taken into consideration for deciding the smallness of the profits of the company. The provisions of section 23A, which we have quoted above only reads that, ' the loss incurred by the company in earlier years ' shall be one of the considerations for deciding the smallness of the profits of the company. A question then arises, can a capital loss incurred by the company (even if we take it that the said sum of Rs. 6,88,000 was a capital loss) form a consideration for judging the smallness of the profits for the applicability of the provisions of section 23A(1). " After considering some authorities the Tribunal held that even if the loss of Rs. 6,88,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this contention now. The material provisions of section 23A, as applicable to the years under reference are as follows : " 23A. (1) Where the Income-tax Officer is satisfied that in respect of any previous year the profits and gains distributed as dividends by any company within the twelve months immediately following the expiry of that previous year are less than the statutory percentage of the total income of the company of that previous year... The Income-tax Officer shall, unless he is satisfied-- (i) that, having regard to the losses incurred by the company in earlier years or to the smallness of the profits made in the previous year, the payment of a dividend or a larger dividend than that declared would be unreasonable ;...mak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ost sight of, requires all matters relevant to the question of unreasonableness to be considered. Capital losses, if established, would be one of them. ' With great respect we entirely agree with this view. The contrary view unduly restricts the discretion of the Income-tax Officer and compels him to hold a particular dividend reasonable though in fact it may be unreasonable. " In view of the approval of the Supreme Court to the observations of the Privy Council in the aforesaid case that capital losses, if established, would be one of the matters for considering the reasonableness of the dividend to be declared under section 23A, it must be held that the decision of the Tribunal in this case was correct. The question referred to this ..... X X X X Extracts X X X X X X X X Extracts X X X X
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