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TMI Blog1994 (11) TMI 98X X X X Extracts X X X X X X X X Extracts X X X X ..... ied under section 271(1)(a), 273(c) and interest under section 139 should be deducted from the distributable surplus for the purpose of calculating additional income-tax leviable under section 104 of the Income-tax Act, 1961 ? " The brief facts leading to the above references may now be noticed. The respondent-assessee is a private limited company. The Income-tax Officer after satisfying himself that for the assessment years in question the provisions of section 104(1) of the Act are attracted, after completing the formalities required under that section, imposed additional tax for the said two years. The assessee, aggrieved by the imposition of additional tax under section 104 of the Act, preferred appeals to the Commissioner of Income-tax (Appeals). The appellate authority upheld the decision of the Income-tax Officer that for the assessment years in question, additional income-tax under section 104 of the Act was leviable. However, it held that in determining the distributable income, the amount of interest and penalties levied should be deducted and on the balance, additional income-tax should be calculated. Both the assessee as well as the Revenue felt aggrieved by the decisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e calculated with reference to the profit as per profit and loss account. " Learned counsel appearing for the Revenue has referred to a decision of the Supreme Court in the case of CIT v. Gangadhar Banerjee and Co. (Private) Ltd. [1965] 57 ITR 176, which has been referred to and approved in CIT v. Asiatic Textiles Ltd. [1971] 82 ITR 816 (SC) and further followed by the Calcutta High Court and the Allahabad High Court in Khaitan Corporation (P.) Ltd. v. CIT [1981] 128 ITR 708 and CIT v. Ramchand and Sons Sugar Mills (P.) Ltd. [1984] 145 ITR 588, respectively. Learned counsel appearing for the Revenue was not in a position to persuade us to answer the question in favour of the Revenue in view of the above decisions. In the case of CIT v. Gangadhar Banerjee and Co. (Pvt.) Ltd. [1965] 57 ITR 176, the Supreme Court, while considering the scope of old section 23A of the Indian Income-tax Act, 1922, observed as follows (headnote) : " The Income-tax Officer, in considering whether the payment of a dividend or a larger dividend than that declared by a company would be unreasonable within the meaning of section 23A of the Indian Income-tax Act, 1922, does not assess any income to tax. He ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ributable surplus. However, the Income-tax Officer will verify whether the amounts of Rs. 24,593 and Rs. 23,963 as penalties under sections 271(1)(a) and 273(c) of the said Act as claimed by the assessee are correct and the penalty amounts will be deducted from the profits as shown by the assessee as per profit and loss account. " Learned counsel appearing for the Revenue challenges the above conclusion of the Tribunal by drawing our attention to a decision of the Supreme Court in the case of Bhor Industries Ltd. v. CIT [1961] 42 ITR 57 and another decision of the Calcutta High Court in the case of Hasimara Industries Ltd. v. CIT [1993] 200 ITR 659. According to learned counsel appearing for the Revenue, the Tribunal has not properly understood the ratio laid down by the Calcutta High Court in Khaitan Corporation (P.) Ltd. v. CIT [1981] 128 ITR 708, and has purported to apply that ratio to the facts of this case. He further invited our attention to the said decision of the Calcutta High Court in Khaitan Corporation (P.) Ltd. v. CIT [1981] 128 ITR 708 and submitted that the learned judges have expressed contrary view on this question, which has not been noticed by the Tribunal. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was thus correctly answered by the High Court. " Further in the case reported in Khaitan Corporation (P.) Ltd. v. CIT [1981] 128 ITR 708 (Cal), which has been wrongly understood by the Tribunal, the learned judges of the Calcutta High Court, while declining to answer an identical question, have observed as follows (at page 715) : " In view of the answer that we have given to question No. 1, question No. 3 must also be answered in the negative and in favour of the assessee. In the view we have taken, it is not necessary for us to consider question No. 4. Had it been independently, however, necessary to consider this, in view of the specific exclusion contemplated by clauses (a), (b) and (c) of section 23A(1) of the Act, it would have been difficult to accept the contention that the penalty was a tax which was to be deducted in making the mathematical calculation a available surplus but, in view of the fact that we have taken into consideration, in considering the distributable surplus for dividend, from the business viewpoint, this question need not be answered. " (emphasis supplied). From the above extracted portion, it is obvious that the Tribunal was not correct in following t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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