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TMI Blog1968 (6) TMI 8X X X X Extracts X X X X X X X X Extracts X X X X ..... ted company which commenced the business in 1947. Up to 1951-52 it made profits, but thereafter until the year 1955-56 it invariably incurred losses. In the year 1956-57 it showed sizable profits. In the assessment year in question, the total income was eventually determined at Rs. 51,099 and the tax liability for that year at Rs. 26,275. On the view that the assessee failed to declare 60% of the balance as dividend, the Third Additional Income-tax Officer, Coimbatore, applied the provisions of section 23A and directed payment of Rs. 9,155.28 as tax on the undistributed profits. In doing so, he did not accept the statement of the assessee in reply to a notice given by him under section 23A that because the company was running at a loss ever ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le to the assessee to be taken into consideration for distribution of dividends in the accounting year. On appeal by the department, the Tribunal restored the order of the Income-tax Officer. At the instance of the assessee the question referred to us under section 66(1) is : " Whether, on the facts and in the circumstances of the case, the provisions of section 23A are applicable to the assessee's case for the assessment year 1957-58? " We are inclined to think that the Tribunal has misdirected itself on the principles that should apply in applying section 23A and, further, a reading of its order shows that it failed to have a precise appreciation of the facts, particularly as to the availability of profits in the assessment year for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icer should consider matters from the point of view of the board of directors. He must arrive at a finding that further or larger dividend than that declared would not be unreasonable, with reference not only to the losses incurred by the company in earlier years and the smallness of the profits made during the relevant year but also to all other relevant circumstances. " The Supreme Court in that case did not find it possible to lay down any concrete tests of reasonableness in the context and pointed out that the only guidance was the Income-tax Officer's capacity to put himself in the position of a prudent business man or the director of a company and his sympathetic and objective approach to the difficult problem that arises in each ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proof. Apart from these considerations, the assessee would further say that even on the basis of the assessment results, there would be no funds available in the hands of the assessee for distribution as dividend for the assessment year in question. Though the Tribunal in its order has referred to the figures with reference to the books and the assessment orders for the several earlier years and their resulting position, we are of the view that it has not precisely applied its mind to the accurate position. For instance, in paragraph 16 of its order, the Tribunal makes this statement : " In working out a loss of Rs. 93,084 the assessee has taken the net figure instead of showing the income of that year. This gives an altogether incorrect ..... X X X X Extracts X X X X X X X X Extracts X X X X
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