9911796707
TMI Blog1978 (7) TMI 19X X X X Extracts X X X X X X X X Extracts X X X X ..... deducted from the amount of profit earlier indicated, the ITO worked out the distributable balance at Rs. 4, 14,875. Against this, the company had declared dividends on preference shares of only Rs. 1,29,062. Before the ITO, the assessee-company had pleaded that in the preceding year the Commissioner had not insisted upon full distribution in view of the requirements of the company for rehabilitation. The rehabilitation programme had continued during the year under consideration before the ITO and it was urged that for the same reason the distribution of dividends actually made should be considered to be sufficient and reasonable. It appeared that even for this year the company had made an application to the Commissioner under s. 23A(3) but ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... requirements for rehabilitation should be considered before applying s. 23A(1) and it was not only under s. 23A(3) that such requirements should be taken into account. The Tribunal accepted the submissions made on behalf of the assessee applying the Supreme Court decision in CIT v. Gangadhar Banerjee and Co. (P.) Ltd. [1965] 57 ITR 176 and the decision of the Madras High Court in Indian Commerce and Industries Co. Ltd. v. CIT [1966] 60 ITR 229. The Tribunal observed that in the case, which it was deciding, the funds were actually required for immediate expenditure on rehabilitation. It also emphasised the fact that in the past the company had not taken any loans, but had in the year under consideration to take a cash credit loan from the B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd 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 only does what the directors should have done putting himself in their place. Though the object of the section is to prevent evasion of tax, the provision must be worked not from the standpoint of the tax collector but from that of a businessman. The reasonableness or unreasonableness of the amount distributed as dividends is judged by business considerations, such as the previous losses, the present profits, the availability of surplus money and the reasonable requirements of the future and similar others. The Income-tax Officer must take an overall picture ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th which we are principally concerned, additions to plant and machinery are in the aggregate amount of Rs. 30,89,139 (See schedule of fixed assets in the balance-sheet of the assessee-company as on March 31, 1956, annex. " E "). The figure for the next year under this item is Rs. 9,14,083. In addition to this, in the following year electric installations have cost the company Rs. 1,07,231. It may be stated that a copy of the order of the Commissioner under s. 23A(3) dated July 13, 1957, for the preceding year is annexed as annex. " E ". There is a reference in the order to the very big development and rehabilitation programme of the company and reference is made to an order placed for such machinery of the value of Rs. 50 lakhs. statement o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st not be lightly assumed that the declaration of a lesser dividend was for the reason which may be subsequently set up when the ITO proceeds to invoke the provisions of s: 23A. The case before us is totally different from the facts being considered by the Madras High Court. Even in the previous year, the assessee-company had set up a case of large scale expenditure for the purchase of new plant and machinery. It was this rehabilitation programme on the basis of which the Commissioner had granted permission under s. 23A(3). Such permission had also been sought for the assessment year under consideration before us, but as the application was belated the Commissioner could not grant the necessary permission as it was felt that there was no ..... X X X X Extracts X X X X X X X X Extracts X X X X
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