9911796707
TMI Blog1979 (3) TMI 44X X X X Extracts X X X X X X X X Extracts X X X X ..... essee should have distributed Rs. 56,577 as dividend, according to the ITO, in order to avoid application of the provisions of s. 23A. However, since the assessee-company was found to have distributed only Rs. 9,600 as dividend within the prescribed period and this figure falls short of the statutory minimum, the ITO in exercise of the powers under s. 23A(1) made an order requiring the assessee to pay an additional super-tax of Rs. 28,653.17. The assessee appealed against the order of the ITO before the AAC. It was contended on behalf of the assessee before the AAC that the assessee's net profits as per profit and loss account came to Rs. 59,716 and if the past losses of Rs. 48,869 are taken into account, no distribution of dividend was possible out of the commercial profits. It was also urged before the AAC that after adjusting past losses of Rs. 48,869 and after making a provision of Rs.57,000 for taxes and taking into account the distribution of Rs. 9,600 as dividend, the assessee's profit and loss appropriation account for the year actually showed a net debit balance of Rs. 57,752. The other contention raised before the AAC was that the amount of Rs. 75,744 which represented ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted to you." We shall refer to this entry in detail later. For the present it is sufficient to point out that it only shows that the liability of the assessee-company to Janaksinh Co. was taken over by M/s. Rawji Amarsi. The Tribunal had also before it the afidavit filed by Amritlal Rawji who is the partner of the defendant-firm, viz., M/s. Rawji Amarsi. It is also necessary to note at this stage that the assessee-company was not the defendant in Suit No. 400 of 1966. When the appeal was heard by the Tribunal, the contention that the sum of Rs.75,744 which was not originally shown by the assessee-company as a part of its total income as being 50 per cent. share of Naraindas Bhimji in a joint venture was again canvassed. It was argued on behalf of the assessee that in any case the said amount was a disputed amount which the assessee would at any time be called upon to pay to Naraindas Bhimji and, therefore, that amount could not be treated as commercial profits liable to be distributed amongst the shareholders. It was contended before the Tribunal on behalf of the department that the assessee had not produced any evidence to show that the business in cloves and ivory was a " joi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ehemently argued that the Tribunal had accepted the relevant entries in the accounts of the assessee and this court should not interfere with the view of the Tribunal which is based on the entries made in the account books. It was further contended that in any case the account books would be sufficient evidence to show that the sum of Rs. 75,744 had also been recorded as the 50 per cent. share of the profits of the joint venture between the assessee-company and Naraindas Bhimji and the amount, being a disputed amount, should be left out of consideration for the purpose of consideration of the commercial profits of the assessee-company. At the stage of the arguments the material produced before the Tribunal was also produced before us and certain documents which have now been made a part of the statement of the case have been made available to us. An additional document which we have taken on record as a part of the statement of the case is the written statement of the defendant partnership firm in Suit No. 400 of 1966. As we understood the argument on behalf of the assessee at the initial stage of the hearing, it was that the amount which is shown as being 50 per cent. share of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee. But the fact remains that in that suit no claim was made against the assessee. The claim in the suit was made on the basis of what is described as an Ankada arrived at after a settlement of August 7,1963 (Ex. " A " to the plaint). This document in substance shows that a sum of Rs. 1,53,826.89 is accepted as the amount payable by Rawji Amarsi, i.e., the defendant firm of M/s. Janaksinh and Co. The plaintiffs in that suit stated that they were carrying on business in Zanzibar, East Africa, in the name and style of M/s. Janaksinh and Co. The figure of Rs. 1,53,826.89 is made up of three items out of which the first item of Rs. 2,747.80 is shown as the balance payable on November 1, 1960, by one Rawji Amrutlal to M/s. Janaksinh and Co. The second item reflects the liability of Rs. 52,470.29 of Amrutlal Rawji being taken over by the firm of Rawji Amarsi and which amount the firm Rawji Amarsi had agreed to pay to M/s. Janaksinh and Co. The third amount is of Rs. 98,608.80, the entry with regard to which has been extracted earlier. This was a liability of the assessee-company to M/s. Janaksinh and Co. but had been taken over by the firm, Rawji Amarsi, and the firm, Rawji Amarsi, ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the same as the affidavit of Amrutlal Rawji filed on November 28, 1966, in the suit that the claim in the suit did not have any relevance whatsoever to the so-called dispute between the assessee-company and Naraindas Bhimji. We have scrutinised the written statement of the defendant-firm in that suit. The written statement gives in detail the series of transactions from 1957 to 1962 between M/s. Janaksinh and Co. and the firm, Rawji Amarsi. It appears from the written statement that Naraindas Bhimji was also a partner of a firm, M/s. R. Damodar Bhimji, and Co. and there were dealings between the defendant-firm and the firm of M/s. R. Damodar Bhimji and Co. The transactions which have been recited in the written statement chronologically do not refer to any joint venture between the assessee-company and Naraindas Bhimji in the calendar year 1960. The first transaction is of the year 1957 relating to 230 bales of cloves sent to India which was supposed to be a joint venture between the firm of R. Damodar Bhimji and the firm of M/s. Rawji Amarsi and Co. The transactions in the year 1959-60, referred to in the written statement, are certain barter transactions whereby the firm of R. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... observe that there is no material on record on which the Tribunal could have drawn any inference that the amount was in dispute. The assessee itself has at no time offered to pay this amount to the alleged claimant, Naraindas Bhimji. On the other hand, the conduct of the assessee appears to be to the contrary. One of the explanations given for transferring the amount, to the reserve is that Naraindas Bhimji should not be able to take advantage of a possible acknowledgement resulting from the said amount being shown as being due to Naraindas Bhimji in the account books of the assessee. Therefore, the assessee itself does not admit that the amount belongs to Naraindas Bhimji. Strictly speaking, there is no evidence at all either in the form of correspondence or in the form of any transaction which can be identified as belonging to any joint venture to show that the assessee-company had at any time entered into a joint venture along with Naraindas Bhimji. It is in this context that one has to consider the entries which are made in the accounts by the assessee. It is no doubt true that in the profit and loss account only Rs. 75,743.89 have been shown as the profit of the alleged join ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Indian I.T. Act. Whether Naraindas Bhimji had knowledge of this entry or not and whether he would have made a claim relying solely on the basis of this entry is a very doubtful proposition. It, therefore, appears to us that no material had been produced by the assessee to show that there was in fact any joint venture. There is also thus no question of the amount being a disputed amount. Mr. Dwarkadas appearing on behalf of the assessee has referred us to a decision of the Calcutta High Court in CIT v. Universal Fertiliser Co. P. Ltd. [1978] 114 ITR 47. That was a case in which certain amounts which appeared in the loan account in the books of the assessee were held not to have been proved as genuine loans and the question was whether addition of those amounts could be taken into consideration for the computation of commercial profits of the assessee and the High Court held that mere failure of the assessee to prove the genuineness of certain transactions, though it would give a right to add back the amounts to the income of the assessee for the purpose of assessment, would not make the amounts available for the purpose of distributing surplus under s. 23A in the absence of any ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the instant case, it is not disputed on behalf of the assessee that the amount of Rs. 75,744 is in its hands. Indeed, that is the very basis of the contention that it will be called upon to pay the amount to Naraindas Bhimji at any time. Therefore, when the assessee conceded that the entire amount should be treated as the income of the assessee before the ITO, the concession was not in respect of any fictional income. The concession was in respect of the profits actually earned and held by the assessee. Such a case cannot be compared with a case where fictional additions have been made on the ground that loans have not been proved and they are being considered for the purpose of computation of the commercial profits. Having heard the learned counsel for the assessee at considerable length, we are not satisfied that there is any evidence in this case to establish that there was any joint venture between the assessee-company and Naraindas Bhimji which would enable the assessee to set apart 50 per cent. of the share of the profit in question so as to have them left out of consideration for the purpose of computation of commercial profits. We must, therefore, set aside the decisi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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