9911796707
TMI Blog1987 (6) TMI 21X X X X Extracts X X X X X X X X Extracts X X X X ..... llowed in the computation of the total income of the assessee. On the basis of the aforesaid, the Income-tax Officer found that the assessee had a distributable surplus of Rs. 6,08,858 for the purpose of distribution of dividends. The Income-tax Officer found further that the assessee was an investment company within the meaning of section 23A of the Indian Income-tax Act, 1922, and as such was required to distribute 90% of its distributable surplus by way of dividends. Within 12 months after the expiry of the relevant previous year, the assessee declared a dividend of Rs. 2,75,000 which was found by the Income-tax Officer to be only 45% of the distributable surplus. On account of the aforesaid, the Income-tax Officer served, a notice on the assessee to show cause why an order should not be passed under section 23A(1) of the said Act of 1922. Within three months of the receipt of the show-cause notice, the assessee declared a further dividend of Rs. 9,900 on June 3, 1964, and contended that the dividends which the assessee had declared were as required under the relevant provisions of the said Act of 1922. It was contended by the assessee that its commercial profits as appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ommissioner noted that in the assessment year involved, the major portion of the income of the assessee, being Rs. 5,05,050, was earned by way of dividends and dealing in shares but the assessee had substantial income of Rs. 4,06,697 from other sources also. In the circumstances, it could not be said that the assessee's business during the relevant assessment year consisted wholly or mainly of dealing in or holding of investments and the assessee was not an investment company within the meaning of section 23A of the said Act of 1922. As a non-investment company, it was held that the assessee was required to distribute 60% of its distributable surplus under the statute. The Appellate Assistant Commissioner next considered whether in view of the commercial profits earned by the assessee in the said assessment year, any further dividend could have been declared by it. The Appellate Assistant Commissioner found that the net profit earned by the assessee as per its profit and loss account was Rs. 6,18,526. To the said net profit, a sum of Rs. 1,45,815 on account of enhancement in the value of the closing stock of shares was added to bring the said profit of Rs. 7,64,541. From the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r year 1960, which was the relevant accounting year, there was an enhancement of Rs. 1,45,915. The said enhancement was duly taken into consideration by the Appellate Assistant Commissioner in computing the available funds in the hands of the assessee. The Tribunal held that no extra funds were available to the assessee, though there was a tax demand in respect of the earlier assessment years consequent on the revaluation of stock for the said years. It was not the case of the Revenue that the enhancement was made on account of suppressed stock which might have been sold without the proceeds being brought into account of the assessee. The Tribunal held that in the facts the assessee could not have declared a dividend larger than what was declared. The appeal of the Revenue was dismissed. On an application of the Revenue under section 66(2) of the Indian Income-tax Act, 1922, the following questions have been directed to be referred by the Tribunal as questions of law arising out of its order for the opinion of this court: " 1. Whether, on the facts and in the circumstances of the case, the Tribunal is right in holding that the assessee-company is not a company whose business co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was found to be carrying on systematic and organised activity of earning profits from investments made in shares of other companies and also by deposit of its surplus funds with its allied concerns which earned interest. It was held that the activity of earning interest through deposits of the surplus funds of the assessee was an investment in the ordinary or popular sense of the term and came within the mischief of section 23A of the Indian Income-tax Act, 1922. Apart from the said two activities, the assessee had no other business and it was held to be a company whose business consisted wholly or mainly in the dealing in or holding of investments within the meaning of the said section 23A. (d) CIT v. Mother India Fire General Insurance Co. Ltd. [1980] 123 ITR 477 (Mad). This decision of a Division Bench of the Madras High Court was cited for the proposition that the word " investment " had to be understood in its ordinary and popular sense or in the commercial sense as the said word had not been comprehensively defined under the Income-tax Act, 1961. According to the dictionary, it was held that if money was advanced to some other persons with the object of securing any incom ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
