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TMI Blog1974 (9) TMI 19X X X X Extracts X X X X X X X X Extracts X X X X ..... he three relevant accounting years would have been unreasonable ?" The assessee is a company in which the public are not substantially interested. The assessment years involved in this reference are 1957-58, 1958-59 and 1959-60, for which the corresponding previous years ended on the 30th June, 1956, 30th June, 1957 and 30th June, 1958, respectively. The assessments to income-tax for these years were completed on the company on a total income of Rs. 2,01,281, Rs. 3,68,041, and Rs. 1,07,177, respectively. The undistributable balance for these years amounted to Rs. 97,621, Rs. 1,78,500 and Rs. 57,981, respectively. The assessee-company had not declared any dividend for these years within 12 months of the expiry of the relevant previous yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d purchased these shares at a price far in excess of the market price in order to enable M/s. Surajmall Nagarmall who were the managing agents of the assessee-company to acquire the managing agency of Elphinstone Mills and hence the loss claimed was notional and should be ignored for the purpose of the application of section 23A of the Act. On the other hand on behalf of the assessee attention was drawn of the Tribunal to the judgment of the Calcutta High Court in I.T. Reference No. 16 of 1964 (Commissioner of income-tax v. Asiatic Textiles Ltd.) covering similar point. On a consideration of these facts the Tribunal held, following the aforesaid decision of the Calcutta High Court, that the loss in question should be taken into consideratio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in 75 I.T.R. 291. Counsel for the revenue is right in that case that aspect of the question was not allowed to be raised as it had not been specifically raised before the Tribunal or the authorities below. This decision went up in appeal before the Supreme Court and the Supreme Court upheld this decision of the Calcutta High Court on the said basis and the judgment of the Supreme Court is reported in Commissioner of Income-tax v. Asiatic Textiles Ltd. While counsel submitted that until an actual loss had been suffered a notional loss or a depreciation would not be a relevant factor to be taken into consideration in considering the reasonableness or unreasonableness of the dividend declared by the directors. We are, however, unable to acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case of Commissioner of Income-tax v. Asiatic Textiles, Ltd. to which we have already referred. There, dealing with the contention similarly though not the same as raised by the revenue in this case, the Supreme Court observed that it was argued that the assessee had not in fact incurred any loss but the value of the shares had gone down in the market. As the assessee, it was argued before the Supreme Court, was still in possession of those shares, there was still a possibility of avoiding the expected loss. Hence, there was no occasion to take note of the depreciation in the value of the shares in the matter of declaration of dividends. The Supreme Court found that this contention was unacceptable. The Supreme Court observed that the di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ors. Counsel for the revenue drew our attention to a decision in the case of Royal Insurance Company Ltd. v. Stephen (H. M. Inspector of Taxes). There what happened was that the assessee for the purpose of its fire, accident and general insurance business held large investments including a variety of British railway stocks. The company admitted that any profit made on the realisation of any investment was part of its profits for income-tax purposes and the Crown admitted that any loss was an admissible deduction from the company's profits. Under the Railways Act, 1921, the company was required to accept new stocks in the amalgamated companies in exchange for the stocks previously held in the companies which under the Act were either amalgam ..... X X X X Extracts X X X X X X X X Extracts X X X X
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