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TMI Blog1974 (7) TMI 52X X X X Extracts X X X X X X X X Extracts X X X X ..... o utilise the general reserve available with the company for the said purpose. It also decided to apply to the Director of Industries, Madras, for permission to import the requisite machinery and also for the allotment of a factory unit in the Government Industrial Estate. The paid up capital of the company was Rs. 52,150 as on March 31, 1960. The accumulated profits and reserve including amounts capitalised from the earlier reserve amounted to Rs. 51,759 as on March 31, 1960. In the year ending on March 31, 1960, it made a profit of Rs. 30,897. The Income-tax Officer, however, assessed the company on a total income of Rs. 31,261. The income-tax and super-tax payable thereon amounted to Rs. 14,067. This left a balance of Rs. 17,194. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad a development project, no concrete evidence as to the extent of such development and the financial requirement therefor was produced before it by the company and that the company had sufficient reserves almost equal to the capital at the time of the declaration of the dividends. Presumably the Tribunal felt that unless the existing reserve amounting to Rs. 51,759 is shown to be insufficient and the necessity for further financial requirement had been shown by the company, the declaration of a lesser dividend than the one contemplated by section 23A cannot be said to be reasonable. At the instance of the assessee, the following question has been referred to this court for consideration: "Whether, on the facts and in the circumstances o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re the appropriations to be made from the profits earned by the company in future. It merely states that the general reserve as on the date of resolution will have to be utilised for the purchase of machinery and raw materials necessary for the proposed industry. Except producing the resolution of the board of directors, dated October 10, 1957, no material had been placed even before the Tribunal to show as to what is the extent of the development and the financial requirement for such development and as to whether the existing reserve was found to be quite inadequate or insufficient. If the board of directors or the general body of the company had considered that, having regard to the future financial requirements of the company, the decla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s stand that the non-declaration of larger dividend was for the purpose of future development of the company. The learned counsel for the assessee referred to the decision in Alavai Industries Pvt. Ltd. v. Commissioner of Income-tax, to which one of us was a party. In that case, it was held that the declaration of dividends by a company is essentially a matter to be dealt with by the board of directors and ultimately by the general body and what percentage out of its profits should be made available to the shareholders and what portion thereof should be reserved for future enterprises, expansion and benefit of the company are exclusively matters for the consideration of the board of directors, and that section 23A of the Indian Income-ta ..... X X X X Extracts X X X X X X X X Extracts X X X X
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