Law:

Section:

Section 104 of the Income tax Act, 1961 - Additional income-tax on undistributed profits of certain companies - Assessment year 1984-85 - Assessee-company filed its return of income by making certain provisions for income-tax and wealth-tax - Assessing Officer gave set off of carried forward business loss as per assessment order for previous years - However, Assessing Officer invoked provision of section 104 on ground that assessee company had not distributed sufficient dividend to its shareholders out of distributable surplus available with it and, accordingly, levied additional tax - However, Commissioner (Appeals) allowed assessee's appeal on ground that assessee had made a very small profit in year relevant to assessment year 1982-83 and incurred heavy loss in year relevant to assessment year 1983-84, conservative appraoch adopted by assessee in distributing dividend was justified and Assessing Officer was bound to look at losses in earlier years including losses and profits made in last ten years for purpose of distribution of dividend - Whether merely because assessee had made excess provision for taxes, in view of difference between provision made for taxation and tax ultimately held to be payable, it could not be said that assessee had not taken into consideration past losses - Held, yes - Whether therefore, additional tax levied under section 104 was not justified - Held, yes FACTS The assessee was a company in which the public were not substantially interested within the meaning of section 2(18). For the relevant year, the assessee filed its return of income by making provision to the tune of Rs. 3,30,000 for income-tax and Rs. 20,000 for wealth-tax. The Assessing Officer gave set off of carried forward business loss as per the assessment orders for the previous years. The Assessing Officer also invoked the provisions of section 104 on the ground that the assessee had not distributed sufficient dividend to its shareholders out of the distributable surplus available with it, and taking into account the shortfall of dividend distributed, he levied additional tax at 50 per cent on undistributed profit. On appeal, the Commissioner (Appeals) held that…

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