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TMI Blog1989 (9) TMI 20X X X X Extracts X X X X X X X X Extracts X X X X ..... at the instance of the Revenue reads thus : "Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the sum of Rs. 5,40,000 being the amount of dividend declared from the general reserve of Rs. 50,65,750, was includible in computing the capital for the purpose of statutory deduction under the Companies (Profits) Surtax Act, 1964 ?" Dr. Balas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e finalised and the directors made their report to the shareholders, the directors could only make a recommendation for distribution of dividend which. recommendation might or might not be accepted by the general body of shareholders. It was only when the general body accepted the recommendation that the liability for payment of dividend would arise and not at any earlier date. The Supreme Court d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... up subject to deduction of tax at appropriate rates. After your sanction, the dividend amounting to Rs. 5,40,000 will be paid out of the general reserve and hence no separate provision has been made therefor." (underlining by us). It is evident that the recommendation does not even remotely suggest that the dividend amounting to Rs. 5,40,000 recommended by the directors was to be paid out of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngs. Unless the directors in their report expressly or specifically state that the payment of dividend is to be made from past savings, the general reserve will have to be reduced by the amount of dividend distributed. We have already referred to the balance-sheet of the company to show that the directors in their report have merely stated that the dividend will be paid out of the general reserve. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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