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TMI Blog1986 (1) TMI 57X X X X Extracts X X X X X X X X Extracts X X X X ..... idend declared being Rs. 1,17,912. He, therefore, levied additional income-tax at 50% of Rs. 1,46,304, the additional tax coming to Rs. 73,152. Admittedly, the profit and loss account which the Tribunal examined for the year ending December 31, 1974, as also the 23rd annual report and the statement of account for the year ending March 31, 1974, showed profit of Rs. 10,33,029.30 out of which the profits from the sale of the house properties alone amounted to Rs. 7,16,138.57. The contention raised before the Income-tax Officer as well as the appellate authority and the Tribunal on behalf of the assessee was that the capital gains on the sale of the house property and rubber estate in Penang should not be considered for the purpose of sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cerned, the order initially made by him under section 104 still appears to be effective. We have, therefore, proceeded to hear the reference. Taking question No. (ii) first, the learned counsel for the assessee urged that the Tribunal had not gone into the question whether the articles of association of the company placed any restriction in the matter of distribution of dividend and it is argued that the business of the assessee company is a plantation business which necessitates building up of reserves and, in the instant case, the balance of the profit having been taken to the reserve account, the mere fact that the profit and loss account included the amount of profits from the sale of Penang properties should not be construed as meani ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -tax Officer to go into the question whether a greater proportion of such gains should have been distributed. It was pointed out that where the entire surplus is channelled into reserves, it is not for the Income-tax Officer to lay down that it should be treated as part of the business profit of the assessee company in order to determine the reasonableness of the dividend declared by it under section 23A of the Act. Now, undoubtedly the decision of the Bombay High Court and a part of the observations in the decision of the Calcutta, High Court referred to above seem to be in favour of the assessee. Unfortunately for the assessee, however, there are two decisions of this court which conclude the matter against the assessee. The first decis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to the distribution of profits by way of dividend in the articles of association of the company. Indeed, no such restriction is pointed out even today by the learned counsel for the assessee. The view taken by the Division Bench that profits arising out of sale of capital assets might also be distributable by way of dividend is binding on us. The later decision of this court in CIT v. Amalgamations (P.) Ltd. [1977] 109 ITR 115 also appears to fully cover the controversy raised in the instant case. In that case, the company had included the capital gains derived by sale of investments in its profit and loss account and distributed the same as dividend and the court held that in such a case, no question can arise as to whether it was commer ..... X X X X Extracts X X X X X X X X Extracts X X X X
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