Law:

Section:

Section 104 of the Income-tax Act, 1961 - Additional income-tax on undistributed profits - Whether where directors and members of assessee-company decide to treat capital gains as part of commercial profits of assessee and amount is shown in profit and loss account, and thereafter if only a part of such gains is distributed as dividend, it would be open to ITO to go into question whether a greater proportion of such gains should have been distributed and, thus, after considering matter, to pass an order under section 104 - Held, yes Facts The assessee was an investment company in terms of section 109(ii ). The profit and loss account as well as statement of account of the assessee for the year relevant to the assessment year 1974-75 showed a profit of Rs. 10,33,029.30 out of which the profits from the sale of house properties alone amounted to Rs. 7,16,138.57. Deducting the tax payable, etc., the distributable income came to Rs. 2,64,216. The ITO took the view that the declared dividend was less than the prescribed percentage, the dividend declared being Rs. 1,17,912. He, therefore, passed on order under section 104 levying additional income-tax at 50 per cent of Rs. 1,46,304, rejecting the assessee's contention that the capital gains on the sale of the said properties should not be considered for the purpose of section 104. On appeal, the Tribunal also rejected the assessee's claim. On reference, the assessee, inter alia, contended that the Tribunal had not gone into the question whether the articles of association of the assessee placed any restriction in the matter of distribution of dividend and it was argued that the business of the assessee was a plantation business which necessitated building up of reserves and in the instant case, the balance of the profit having been taken to the reserve account the mere fact that the profit and loss account included the amount of profits from the sale of the impugned properties should not be construed as meaning that, that amount was available for distribution as dividend. Held In Factors (P.) Ltd. v. CIT [1975] 98 ITR 105 (Mad.) , it was held that the manner in which a company's profits are to be divided among the…

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