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 years 1958-59 and 1959-60 – Whether where having regard to assessed income under proviso to section 13 of 1922 Act, there was no surplus available with assessee-company which could be distributed as dividend, provisions of section 23A of 1922 Act were not applicable – Held, yes FACTS The assessee-company had filed returns showing a loss in the assessment year 1958-59 and income in the assessment year 1959-60. On certain defects being found in the accounts maintained by the company, the ITO did not accept the results shown in the accounts and estimated the total income under the proviso to section 13 of the 1922 Act. Further, the ITO having found that the assessee had not declared any dividend within the period of 12 months immediately following the accounting period relevant to the assessment years 1958-59 and 1959-60, issued a show cause notice as to why action under section 23A of the 1922 Act should not be taken. In reply to the notice, the assessee pointed out that in the first year there was a loss and, therefore, there was no question of declaring any dividend. In respect of the second year the assessee pointed out that in the second year no surplus was left after adjustment of losses suffered by the company in the earlier years. The ITO did not accept the explanation of the assessee and levied super-tax. The Tribunal proceeded on the footing that section 23A of the 1922 Act was applicable, but held on the facts that the assessee-company was justified in not declaring dividend in view of its past losses, the huge tax liability and smallness of the profit. On reference : HELD In the instant case, the Tribunal, on a computation of the income, the figure of which was taken as finally assessed after the proviso to section 13 of the 1922 Act was invoked, and after making allowance for the losses incurred and tax liability for the years 1958-59 and 1959-60, had come to the conclusion that there was nothing left for declaration of the dividend. The figures referred to by the…

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