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TMI Blog1995 (4) TMI 86X X X X Extracts X X X X X X X X Extracts X X X X ..... ther things, the assessee had shown proposed dividend of Rs. 9 lacs as a liability which was not deducted from the assets for purposes of computing the capital employed. According to the Assessing Officer this was a debt owed by the assessee which had to be deducted from the aggregate value of the assets for arriving at the capital employed. Thus a sum of Rs. 9 lacs was reduced from the capital of Rs. 87,77,275 and relief under section 80J allowed accordingly. We may mention that the Assessing Officer had also reduced the value of work-in-progress to the extent of Rs. 10,85,870 from the capital employed but the learned CIT (Appeals) considered it as part of the capital employed and did not reduce it from the amount of Rs. 87,77,275. In the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 980-81, the Board of Directors had approved the dividend of Rs. 9 lacs in their meeting held on 24-12-1979. It was submitted that the Annual General Meeting was held on 15-2-1980 and as per the Companies Act, dividend was payable within 42 days of the Annual General Meeting which fell sometime in March 1980. It was submitted that for purposes of computation of capital employed, the position as obtaining on the first day of the accounting year, namely, 1-10-1979 had to be taken into consideration. It was submitted that as on 1-10-1979 there was no debt owed by the assessee company for payment of dividend. It was also submitted that before approval at the Annual General Meeting, there was no debt owed which could be enforced by any shareholde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounted to a debt owed. 8. In the case of Kesoram Industries Cotton Mills Ltd. v. CWT [1966] 59 ITR 767, the Supreme Court held as under :--- " The directors cannot distribute dividends but they can only recommend to the general body of the company the quantum of dividend to be distributed. Under section 217 of the Indian Companies Act, there shall be attached to every balance-sheet laid before a company in general meeting a report by its board of directors with respect to, inter alia the amount, if any, which it recommends to be paid by way of dividend. Till the company in its general body meeting accepts the recommendation and declares the dividend, the report of the directors in that regard is only a recommendation which may be wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... holders not to accept the recommendation at all or to declare a dividend of an amount lesser than that recommended by the directors. " 10. If the above decisions are applied to the facts of the instant case, it is noted that the Board of Directors recommended the payment of dividend on 24-12-1979 and hence a provision of proposed dividend was made in the books for assessment year 1980-81 for which the year ended on 30-9-1979. The Annual General Meeting was held on 15-2-1980 and the dividend became payable only in March 1980. Thus as on 1-10-1979 which is the first date of the computation period, it could not be said that there was a debt owed by the assessee to the shareholders. In that view of the matter, the proposed dividend of Rs. 9 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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