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TMI Blog1973 (8) TMI 35X X X X Extracts X X X X X X X X Extracts X X X X ..... question, the assessee-company's distributable surplus under section 23A of the Indian Income-tax Act, 1922, were found to be Rs. 24,378, Rs. 89,941 and Rs. 90,110, respectively. The company did not pay any dividend to its shareholders. Accordingly, the Income-tax Officer computed the super-tax payable by the assessee, as required by section 23A of the Act. The assessee filed an appeal before the Appellate Assistant Commissioner and contended that under the provisions of the Working Journalists Act, 1955, the company had to make provision for payment of gratuity to its workmen which could not be done so far because of lack of funds. It had also to arrange for funds amounting to Rs. 10,00,000 for purchasing a rotary machine and for construct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome-tax Act, 1922/1961, the Appellate Tribunal was right in holding that the assessee-company was justified in not declaring any dividend out of the profits in respect of each of the relevant previous years ? " Section 23A provides that where the Income-tax Officer is satisfied that in respect of any previous year, the profits and gains distributed as dividends by any company within the twelve months immediately following the expiry of that previous year are less than the statutory percentage of the total income of the company of that previous year as reduced by certain items mentioned in clauses (a) to (c) therein, the Income-tax Officer shall, unless he is satisfied that having regard to the smallness of the profits made in the previou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asonable and the income-tax authorities erred in assessing the company to super-tax. This question, viz., whether the profits are so small that it would be unreasonable to distribute dividend is essentially a question of fact which depends upon the facts and circumstances of each case. One of the considerations for determining the smallness of profit will, in our opinion, be to take into account the circumstance that the amount of profit earned by the assessee is such that commercially it would not be reasonable for it to declare some dividend or dividend up to the statutory limit, from out of it. In this connection, consideration of the nature and purpose of the object for which the assessee proposes to utilize its profits would be very ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wn in the profit and loss account the capital expenditure of the company during the relevant accounting year, for the purposes of determining its business profits or actual profits from out of which the dividend had to be declared. In our opinion the decision relied upon by the learned counsel merely lays down that while determining the amount of commercial profits, from out of which the company is required to pay dividend and for determining the distributable surplus, the Income-tax Officer is not to take into consideration expenses of capital nature. This case is no authority for the proposition that after the distributable surplus has been determined by applying correct criteria, the Income-tax Officer while considering the reasonablenes ..... X X X X Extracts X X X X X X X X Extracts X X X X
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