Law: Income Tax Act, 1922

Section: 23A

Indian Income tax Act, 1922 (XI of 1922)-Section 23A- Company-Declaration of dividend-Reasonableness- Whether to be based on current year's profits and not the accumulated profits of earlier years- Held yes-Company drawing on earlier years profits for distributing portion of dividend- Whether can be used against it when current year's profits are otherwise reasonable-Held no-Distribution of capital gains-Relevancy. Section 23A of the Indian Income-tax Act, 1922. does not bring in for consideration the existence of reserves or accumulated profits of earlier years for the purpose of finding out whether the assessee is attempting to avoid payment of appropriate tax by the shareholders by not making any distribution or making an unreasonable distribution of dividends. The question of reasonableness or unreasonableness of the distribution has to be adjudged by taking into account the current year's profit and not the accumulated profit of earlier years. If in law the company could confine itself to the relevant years profits, the fact that the company drew on the earlier years profit for a portion of the actual distribution cannot tilt the balance. Further, the fact that the company tried to be more reasonable than necessary by making some distribution out of the earlier years profits when it Was not obliged to drew on the earlier years profits for making any distribution, cannot be used against it, as distribution, which is otherwise reasonable, does not become unreasonable by the draw on earlier years' profits. When the company itself has included the capital gains derived by sale of investments in its profit and loss account and distributed the same as dividend, no question can arise as to whether it was commercial profit available for distribution as dividend. Cases referred to : Bombay Cycle Stores Co. (P) Ltd. v. CIT [1964] 51 ITR 460 (Bom). CIT v. Amalgamations (P.) Ltd, [1977] 108 ITR 895 (Mad). CIT v. Bipinchandra Monganlal & Co. Ltd. [1961] 41 ITR 290 (SC). CIT v. Gongadhar Banerjee & Co. Pvt. Ltd. [1965] 57 ITR 176 (S.C.). CIT v. Meccano Floorings (P) Ltd. [1973] 92 ITR 352 (Mad). CIT v. Suleman & Co. Ltd. [1968] 68 ITR 94 (Bom). Factors (P.)…

Deprecated: trim(): Passing null to parameter #1 ($string) of type string is deprecated in /home/digixyei/sldsystempk.com/view/master-layout/view_case.php on line 492