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TMI Blog1972 (12) TMI 15X X X X Extracts X X X X X X X X Extracts X X X X ..... ENT The judgment of the court was delivered by RAMASWAMI J.-The assessee is a private limited company doing business in the manufacture and sale of mosaic tiles, etc. The share capital of the company consists of 55 shares of Rs. 1,000 each. The commercial profits for the year ended March 31, 1959, as per audited accounts was Rs. 19,645. A sum of Rs. 3,109 was paid towards arrears of tax and the tax for the year was Rs. 13,308. In the general body meeting held on October 12, 1959, it was resolved that no dividend shall be declared for the year ending March 31, 1959. For the year ending March 31, 1960, the company returned a loss of Rs. 18,805 and ultimately the High Court determined the loss when the amount was disputed by the department ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er the balance-sheet of the company as on March 31, 1959, there was a slam of Rs. 12,000 under the dividend equalisation reserve and that if the accounts were properly worked out there would be sufficient profit for distribution as dividend. It was also contended that the losses incurred in the subsequent year could not be taken into account in considering the question as to whether the provisions of section 23A(1) are attracted or not. The Tribunal observed that the general body meeting was held on October 12, 1959, that the balance-sheet was drawn up on September 14, 1959, and that therefore the assessee could have anticipated the loss for the accounting year 1959-60 and in fact the assessee returned a net loss of Rs. 18,805 for that year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ...... " It is now well-settled that the losses incurred in the earlier years and the smallness of the profits made in the previous year are not the only factors which the Income-tax Officer should take into account in considering the question whether the payment of a dividend or a larger dividend than that declared would be unreasonable. The section requires all matters relevant to the question of unreasonableness to be considered by the Income-tax Officer while passing an order under section 23A(1). Thus in Commissioner of Income-tax v. Gangadhar Banerjee Co. the Supreme Court observed : " The r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that not distributing the larger dividend was unreasonable. In this connection we may also refer to the decision of the Bombay High Court in Bombay Cycle Stores Co. (P.) Ltd. v. Commissioner of Income-tax. In that case the balance-sheet showed a general fund created out of the taxed profits of the earlier years. The argument on behalf of the revenue which was accepted by the Tribunal was that the losses in the earlier years need not be taken into account in determining the available commercial profits of the year because there was the accumulated reserve which exceeded the amount of the loss. In considering this argument, the court said : " In our opinion, that approach was not a proper approach as is required by law. Section 23A require ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany. The Income-tax Officer can step in under section 23A(1) only if the directors unjustifiably refrain from declaring dividend. If the directors of a company had reasonable grounds for not declaring any dividend, it is not open for the Income-tax Officer to constitute himself as a super-director. " It is seen from the ratio of these cases that no uniform standard or yardstick could be applied. Section 23A is one of those series of sections which are directed against avoidance of tax. The Income-tax Officer will have to decide the question with reference to the facts and circumstances in each case. The touch stone in all such cases is whether the non-declaration or declaring the dividend less than the statutory percentage of the total ..... X X X X Extracts X X X X X X X X Extracts X X X X
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