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TMI Blog1982 (4) TMI 10X X X X Extracts X X X X X X X X Extracts X X X X ..... me of the assessee cash credits amounting to Rs. 2 lakhs and a sum of Rs. 5 lakhs on account of alleged suppression of production and sales under the head " Business ". The tax payable by the assessee was determined at Rs. 10,47,356. The assessee preferred an appeal and the AAC by his order dated 12th January, 1967, reduced the total income to Rs. 10,25,206. The additions on account of cash credit and suppression of production and sales were deleted. The assessee at its annual general meeting of the shareholders of the company held on 10th March, 1960, declared a dividend of Rs. 2,37,500. The dividend was, however, actually paid on 18th March, 1960. As in the opinion of the ITO, no dividend was declared within 12 months Immediately fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... compute the distributable surplus taking into account the revision of the total income in consequence of the appellate order. On further appeal, the Tribunal accepted the position that the books reflected the correct commercial profits. Since the tax assessed, at the time when the ITO made the order under s. 23A(1) on 21st October, 1965, stood at Rs. 10,47,366 and the commercial profits amounted to less than this figure, it would be unreasonable to expect the assessee-company to declare any dividend. The Commissioner applied to the Tribunal to refer certain questions of law arising out of the order of the Tribunal to the High Court. The Tribunal rejected the said application. Thereafter, on the application of the Commissioner under s. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f cash credits and suppressed sale amount added back by ITO) Less : Tax levied thereon 10,47,356 Distributable surplus 8,50,268 A.A.C.'s calculation Total income assessed 10,25,206 (Additions on account of cash credit and suppressed sale deleted) Less : Tax levied thereon 5,66,623 --------- Distributable surplus 4,58,583 --------- Tribunal's calculation Commercial profits of the company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had a sum of Rs. 8,50,268 as distributable surplus in its hands. He has, relied on the case of Gobald Motor Service (P.) Ltd. v. CIT [1966] 60 ITR 417 (SC), for the proposition that what the ITO added to the profits disclosed by the books: of the company on account of suppressed sales or any other suppressed profits should be added for the purpose of ascertaining the real commercial or accounting profits of the company. Alternatively, it has been argued on behalf of, the Revenue that if the ITO's calculation of commercial profits is discarded, then logically the-tax calculated should equally be discarded if commercial profit is calculated on the basis of the AAC's computation of total income. In that event, the tax should be computed on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4,000 there was only an amount of about Rs. 4,000 left which was available for distribution. Therefore, the order under s. 23A was not justifiable. The Supreme Court observed at p. 183 of the said report as follows: "Another incidental question is whether for the purpose of ascertaining the net commercial profits the tax estimated or the tax actually assessed shall be deducted. In a case where an Income-tax Officer takes action under section 23A of the Act before the tax for the relevant period is assessed, only the estimated tax can be deducted ; but, there is no reason why, when the tax had already been assessed before he takes action under this section, the estimated tax and not the real tax shall be deducted therefrom. In this view, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g certain deductions claimed by the assessee and confirming some additions made by the ITO, the tax liability should be computed on the basis of income upholding the addition of Rs. 40,000. It was held in that case that after the tax liability had been computed o the added income it will be possible to determine the question whether there was distributable surplus and whether the order under s. 23A of the Indian I.T. Act, 1922, was not justified in, law. The facts of the case were entirely dissimilar and the questions canvassed in this case did not arise for consideration there. In our opinion, the principle laid down in that case has no application to the point at issue in the present reference. There is also another aspect of this case. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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