Law: Income Tax Act, 1922

Section: 23-A

Law: Finance Act, 1955

Section: 15, 10(1), (4), 28

Income-tax-Company-Distribution of 60 per cent. as dividend in accordance with section 23-A-Subsequent amendment of section retrospectively requiring 100 per cent to be distributed Application of amended S. 23-A to company-Whether valid-Test of reasonableness - Indian Income-tax Act, 1922, S. 23-A; Finance Act, 1955, Ss. 15, 10(1) & (4) and Finance Act, 1956, S. 28. The assessee-company distributed in December 1954, 60 per cent. of its profits as envisaged in section 23-A as it stood at the relevant time. Subsequently, section 23-A was amended by the Finance Ac's of 1955 and 1956 retrospectively requiring a distribution of 100 per cent. of the profits. Section 20(4) of the Finance Act, 1955, however, made the unamended provision applicable in respect of all accounting periods ending on or before March 31, 1954. The accounting period of the assessee company having ended on May 31, 1951, the Income-tax Officer took action under section 34 for applying the provisions of section 23-A as amended and levied additional super tax, rejecting the contention of the assessee that the amendments made by the Finance Acts of 1955 and 1956 would not apply to it. The Tribunal, however, agreed with the contention of the assessee company. On a reference to the High Court: Held, that section 20(4) of the Finance Act, 1955, preserved the application of the unamended section 23-A only in respect of all accounting years ending on or before March 31, 1954, and as the accounting period of the assessee-company ended only on May 31, 1954, the amended provision was applicable. Notwithstanding the statutory prescription by reason of the amendment of section 23-A, the test of reasonableness is yet applicable and the Income-tax Officer should find that the act of the company in not having declared the statutory 100% dividend is unreasonable upon an investigation into the merits and relevant circumstances. Commissioner of Income-tax v. Gangadhar Banerjee & Co. (Private) Ltd. (1965) 57 I T R 175 (S C) ; Commissioner of Income-tax v. Teja Singh (1959) 35 I T R 408 ; East End Dwellings Co. Ltd. v. Finsbury Borough Council 1952 A C 109 ; Indian Commerce and Industries Co. Ltd. v.…