1979 (2) TMI 24

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..... in this reference is 1961-62. The short point involved is about the application of s. 23A(1) of the Indian I.T. Act, 1922. The accounting year followed by the assessee-company was the calendar year. Though the assessee was liable to distribute a dividend to the extent of 65% of its total income, it did not declare anything during the relevant assessment year. However, it had declared more than 65% of its total income less taxes as dividend on 26th February, 1962, which is beyond the accounting year of the company. Accordingly, the ITO issued a show-cause notice to the assessee as to why an order under s. 23A(1) should not be passed for the assessment year in question. In reply, the assessee-company pointed out that it had declared dividends .....

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..... that s. 23A was a penal provision and if the assessee had not been able to call the annual general meeting for a good reason, then there was no warrant for holding that s. 23A had been violated. In the view of the Tribunal, only a company which had held its annual general meeting within this period and at that meeting declared no dividend or a dividend less than the statutory percentage, could be regarded as having violated s. 23A. The Tribunal applied its mind to the reasons offered by the assessee for the delay in holding the annual general meeting and concluded that the assessee could not be said to have not held the meeting with a motive to avoid distribution of dividend. According to the Tribunal, the fact that the assessee had at the .....

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..... tely following the expiry of the previous year relevant to the assessment year but before the date on which he makes an order under s. 23A(1). From the report, it is found that, although reported earlier, the Supreme Court decision is in fact delivered subsequent to the decision of the Delhi High Court in CIT v. Grace and Style (P.) Ltd. [1973] 90 ITR 247. It is clear that the principle laid down by the Supreme Court in Abdul Rahim Osman Co.'s case [1972] 86 ITR 436 is the one which found favour with the Tribunal and if that principle is applied, as it must be, then the action of the ITO was not valid. In the result, the question referred to us is answered in the negative and in favour of the assessee. Parties, however, will bear thei .....

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