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Section 104 of the Income-tax Act, 1961 [Corresponding to section 23A of the Indian Income-tax Act, 1922] - Additional income tax on undistributed profits of certain companies - Income-tax Officer passed order under section 23A holding that dividend declared by company fell short of statutory rate of dividend of 65 per cent - Tribunal, on basis of book profits, held that section 23A was not applicable - Revenue contended that Tribunal while working out available surplus had not considered development rebate reserve and excess provision for depreciation for which assessee was not entitled - Whether when before Tribunal, these two items had not been specifically referred to and, moreover, Tribunal was not called upon to consider these items as necessary additions to profits as disclosed in profit and loss account to find out commercial profits, Tribunal was right in holding that application of section 23A was not called for - Held, yes FACTS The assessee was a transport company in which the public were not substantially interested. For the assessment years 1960-61 and 1961-62, the ITO found that the dividend declared by the company fell short of the statutory rate of dividend of 65 per cent, and that therefore the assessee was liable to be proceeded against under section 23A. In that view, he passed an order under that section. The AAC dismissed the assessee's appeal. The Tribunal, however, on facts, held that the orders passed under section 23A were not sustainable. On reference, the revenue contended that the Tribunal had merely accepted book profits and that in relation to the assessment year 1960-61, there was a provision for development rebate reserve though the assessee was not entitled to the said allowance under the Act, and, that, if the said amount was added to the book profits, it would clearly show that the dividends declared were unreasonable. For the assessment year 1961-62, the revenue contended there was excess provision for depreciation, and that, if such excess amount of depreciation was added back to book profits, larger surplus profits would be available. HELD It was seen that, before the Tribunal, these two items had not been specifically…

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