Law: Income Tax Act, 1922

Section: 23A

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 1952-53 - Assessee-company in which public were not substantially interested contended that certain sum paid to certain person in pursuance of a compromise to end protracted litigation should be deducted in determining profits available for distribution before order could be made under section 23A(1) - Whether in considering issue as to smallness of profits before passing order under section 23A, ITO has to take into account commercial profits of company and not its assessable profits - Held, yes - Whether, on facts, Tribunal was right in holding that although compromise amount might not be deductible for purposes of assessment to tax but since it was made to get rid of disturbing element in assessee's business, it had to be deducted to ascertain profits available for distribution for application of section 23A of 1922 Act - Held, yes FACTS The assessee was a company in which the public were not substantially interested within the meaning of section 23A. For the assessment year 1952-53, it returned an income of Rs. 1,56,894. The ITO however, after disallowing certain expenditure, computed the same at Rs. 2,33,466. After deducting tax payable thereon the available balance was Rs. 1,32,054. The ITO, finding that the dividends declared by the assessee were less than 60 per cent of the said available income, made an order under section 23A that the undistributed dividend be deemed to be the dividends distributed. The assessee contended that it had to pay Rs. 21,320 as secret commission for the purpose of its business and this should be taken into account in determining the smallness of the profits; and that it had paid Rs. 50,000 to Dr. J in the year of account in pursuance of a compromise between him on the one hand and the company on the other in a then pending litigation which should also be taken into account in determining the issue of smallness of profits. According to the assessee if these amounts were taken into account in determining the available profits for…

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