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TMI Blog1988 (4) TMI 98X X X X Extracts X X X X X X X X Extracts X X X X ..... difference between the distributable income and the dividend actually declared. Before the ITO the assessee-company inter alia stated that it had taken lot of loans and the company had to repay in the next accounting year the loans worth Rs. 14,67,800. It was also submitted that the company has to purchase capital assets worth Rs. 2,38,000 in the immediate near future. The ITO did not accept these contentions of the assessee. He held that in cases of all the companies, the repayment of loan is a regular feature and even if there was a commitment to repay the loan in the next year the company was not only going to earn in the next year but also to receive the money back from its debtor and the company could repay loan out of that amount. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epayment of loans and for the purchase of capital assets to find out the reasonableness of the declaration of the dividend below the statutory limit and if the facts of the present case are looked into properly there is no reason whatsoever for the lesser declaration of the dividend so far as this year is concerned. Placing reliance on the decisions in the case of Srinivas Banking Co. Ltd. vs. CIT (1965) 58 ITR 89 (Cal) in the case of Indo Ceylon Dental & Surgical Co Ltd. vs. CIT (1975) 98 ITR 536 (Mad) and in the case of CIT vs. Ahmed Tea Co. P. Ltd.(1977) CTR (Gau) 290 :(1977) 108 ITR 853 (Gau) he submitted that the company was under a sound financial position and capable of declaring dividend at statutorily prescribed rates. He further s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e submitted that the fixed assets have come down from 1.4 crores to Rs. 1.32 crores whereas the current assets have increased from Rs. 96 lakhs to Rs. 1.6 crores in the year under consideration. Therefore, there was no question of any locking up of the funds. He further submitted that if the funds were required for further development, the assessee should have applied to the CBDT under s. 107(A) whereunder the board has been given power to reduce the minimum declaration of dividend in certain circumstances. It is not a matter to be adjudicated in appeal as otherwise according to him s. 107(A) would become otious. 5.The learned counsel for the assessee, on the other hand relied on the decision of the Calcutta High Court in the case of Bina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... object of the section is to prevent the evasion of tax, the provisions must be worked not from the stand point of tax collector but that of a businessman. The reasonableness or unreasonableness of the amount distributed as dividend is to be judged by business consideration such as previous losses, the present profits the availability of surplus money and the reasonable requirements of the future and similar others. An over-all picture of the financial position of the business is to be taken into consideration. Their Lordships rejecting the contention of the Revenue held that the ITO can also take into consideration any circumstances other than past losses and smallness of profits. Applying the aforesaid guiding tests laid down by the Supre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l activity. From the mere declaration of a lesser dividend it cannot be automatically inferred that the directors wanted to create the reserve for the future expansion of the company. In the absence of the material placed by the assessee before the Court to support the stand that the non-declaration of a larger dividend was for the purposes of the future development of the company, it was held that the provisions of s. 23A, (pari Materia to s. 104) were applicable. 8. In the case of Srinivas Banking Co. Ltd., the Calcutta High Court found that the assessed income of the company was about Rs. 22,453 and the tax payable was Rs. 11,927 leaving a balance of r. 10,526.60 percent of this came to about Rs. 6,3000. There was no necessity for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asonable part of its actual income. 9. It may be stated that s. 107(A) was introduced in the Statute w.e.f. 1st April 1964 authorising the CBDT to reduce the minimum requirement of declaration of dividend in case the assessee an application that funds are required for development of the business. Normally, therefore, if money, is required for the current requirement for the development of its business, the special provision contained in s. 107(A) should be followed and the Board should be the authority to issue that permission. Be that as it may, on the fact of this case this section is not applicable. What the assessee's case is that it had committed to pay Rs. 17 lakhs and odd for repayment of loan and interest and for the commitment of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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