Law:

Section:

section 23a of the indian income-tax act, 1922 [corresponding to section 104 of the income-tax act, 1961]-additional tax on undistributed profits-whether dividend declared two months and twenty-six days after expiry of stipulated period of twelve months immediately following the close of previous year should also be taken into consideration for levy of super tax under section 23a-held, yes Facts The assessee, a private limited company, did not declare dividend within twelve months immediately following the expiry of the previous year, but, declared more than 65 per cent of its total income less taxes as dividend after two months and twenty six days from the expiry of the statutory period of twelve months. In reply to notice issued under section 23A(1), the assessee explained that due to the illness of the accountant and on account of its general manager being on leave, the annual general meeting of the assessee could not be held in time and, therefore, the dividend could not be declared in time. The assessee further requested the ITO to condone the delay. The ITO did not accept the explanation of the assessee and observed that he had no power under section 23A to extend the specified period given in the Act. The ITO accordingly levied additional tax on the undistributed profits of the assessee under section 23A. The AAC held that no discretion was given to the ITO under section 23A for relaxing the condition and upheld the ITO's order. The Tribunal took the view that the provisions of section 23A were penal in nature and that if the assessee was not able to call the annual general meeting for good reason, then there was no warrant for holding that the provisions of section 23A were violated by the assessee. The Tribunal observed that the fact that the assessee declared dividend at the belated meeting at higher percentage than the statutory percentage, was a pertinent fact. The Tribunal accordingly set aside the AAC's order holding that the invocation of section 23A was not justified. On reference : Held In calculating the undistributed balance of the total income of the assessee for the purpose of levy of super tax under section 23A, the ITO should take into…

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