Law:

Section:

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 - Assessment year 1955-56 - Whether where assessee-company was managing agent of another steam company and held shares of it by way of investment, same would constitute fixed assets, and, thus, section 23A of 1922 Act could not be made applicable to assessee-company - Held, yes FACTS During the relevant assessment year, the assessee-company was the managing agent of another company and was holding certain ordinary shares in the said company. In proceedings under section 23A of 1922 Act, the ITO calculated the income-tax and the corporation tax and held that the said section 23A of 1922 Act was applicable in the case of the assessee and did not give the rebate, which was available under Part I-B of the First Schedule to the Finance Act of 1955 which would have been allowable if it was held that section 23A was not applicable. On appeal, the AAC held that the investment in the shares could not be given the status of fixed assets like land and buildings, furniture and fittings. He also found that the investment in the said shares could not be for retaining controlling interest of the managed company by the assessee inasmuch as the said investment fluctuated during the course of years. Accordingly, the assessee's appeal was rejected. On further appeal, the Tribunal however, found that the shares held by the assessee in the steamship company should be deemed to be fixed capital in the hands of the assessee. and accordingly, section 23A of 1922 Act could not be made applicable to the assessee company. On reference : HELD While distinguishing between fixed assets and current assets no distinction has been made between an investment company and an ordinary company. Moreover, the same distinction is confirmed by the statutory form provided in the Companies Act, 1956, and whatever be the nature of the company the said form would govern its balance-sheet. It was also to be noted that, in the instant case, it had been found as a fact that the shares were held by assessee by way of investments and not…

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