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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 ..... 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 in the city of Calcutta, the income arising from which is assessed under section 9 of the Act. The assessee did not declare any dividends in respect of any of the aforesaid 3 assessment years. The total incomes assessed for the aforesaid 3 years were Rs. 3,88,861, R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mounts 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 to losses incurred by the company in earlier years '. " He was of the opinion that as judicial decisions had equated smallness of profits with commercial profits, the losses of past years should also be confined to commercial losses. As the assessee's case was that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 be taken to be a capital loss, since the company was left with no accumulated profits, it would be unreasonable for the company to declare any dividend during any of the years under reference. Accordingly, the Tribunal allowed the appeals and set aside the orders under sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ;...make an order in writing... " In Commissioner of Income-tax v. Gangadhar Banerjee & Co. (Private) Ltd. the Supreme Court had occasion to consider the words " smallness of profit " and " past losses " in the aforesaid section. At page 182, the Supreme Court referred to the decisi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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