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TMI Blog1978 (8) TMI 17X X X X Extracts X X X X X X X X Extracts X X X X ..... ed. The plea, however, was not accepted by the ITO. According to him there was enough money to meet all the tax liabilities and also the tax liability of the year in question. Accordingly, the ITO levied an additional tax of Rs. 50,565. Aggrieved by the said order the assessee preferred an appeal before the AAC. The AAC, in modifying the order of ITO, gave partial relief to the assessee. Both the assessee and the department preferred appeals before the Tribunal. The Tribunal allowed the department's appeal, upholding its contention that the capital gains included in the assessed income were not liable to be excluded from consideration in determining the distributable surplus of the company. Dealing with the assessee's appeal, the Tribunal upheld the finding of the authorities below. It should be mentioned that before the Tribunal the assessee's counsel raised a new contention, viz., that Indo-Pak war broke out on September 5, 1965, in which the vessels of the assessee plying in the inland waterways between Calcutta and Assam via East Bengal were seized by the Pakistan authorities and when the general meeting was called on December 29, 1966, there was no certainty that the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... easonable. But the ITO has been sufficiently cautioned by the Supreme Court in the case of CIT v. Gangadhar Banerjee and Co. (P.). Ltd. [1965] 57 ITR 176. It is observed by their Lordships that the ITO should have a " sympathetic and objective approach " and should put himself in the position of a director acting as a prudent businessman. With this background we are to approach the issue before us. Dr. Debi Pal, learned counsel for the assessee, relying on the decisions of this court in the case of Cooch Behar Trading Co. Pvt. Ltd. v. CIT [1978] 112 ITR 150 and Panama Pvt. Ltd. v. CIT [1978] 113 ITR 290, argues that the I.T. authorities should not have been oblivious to the fact that the company's fleet to the extent of Rs. 8,00,000 had been lying detained in Pakistan and the company had not only been deprived of its income but also the fate of the fleet was completely uncertain. Being faced with such calamities the directors thought it wise not to declare dividends for the year in question. Whether in a particular year dividends should be declared or not was a matter primarily for the directors of the company to decide. The ITO would certainly step in for taking action, if the dir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t High Court in CIT v. Ramji Dayawala Sons Pvt. Ltd. [1972] 85 ITR 37, At page 44 of the report their Lordships observed as follows: " The losses suffered in subsequent years by themselves are not to be taken into account for the purpose of determining the applicability of section 23A; but while judging whether the decision of the company or the board of directors of the company to declare a particular dividend or not to declare any dividend at all was reasonable or not, the fact that losses did occur in subsequent years and to that extent went to justify or to substantiate the reasonableness of the anticipated losses at the time when the decision regarding dividend was taken, would be relevant circumstances and relevant pieces of evidence to be taken into account by the taxation authorities." It should not be out of place to mention that this case was not referred to before their Lordships of the Patna High Court in deciding the case of Jamshedpur Engineering Machine Manufacturing Co. P. Ltd. [1975] 98 ITR 33. In my opinion the controversy, if any, has been set at rest by the Supreme Court in the case of CIT v. Gangadhar Banerjee and Co (P.) Ltd. [1965] 57 ITR 176. At pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... swer the question in the negative and in favour of the assessee. Each party to pay and bear its own costs. DEB J.-At the very outset, it may be noted here that the authorities below have levied additional tax under s. 104 of the I.T. Act, 1961, on the assessee without ascertaining the amount of commercial profits made by the assessee for the relevant accounting year. The assessee is a shipping company to which s. 104 of the Act applies. The accounting year ended on June 30, 1965. The assessee did not declare any dividend. The ITO found that there was a distributable surplus of Rs. 2,02,261 and, therefore, he levied additional tax on the assessee under the aforesaid section. The assessee got some relief in the first appeal and, therefore, filed a further appeal. A new plea was taken by the assessee before the Tribunal and the facts relevant for our purposes as found and stated by the Tribunal may now briefly be stated. During the Indo-Pakistan war of September, 1965 a part of the assessee's fleet of the value of Rs. 8 lakhs was seized in East Pakistan. The assessee was not only losing its income but the condition of the fleet was also deteriorating. The Government of India w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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