Law: Income Tax Act, 1922

Section: 23A

Income-tax-----Company---Undistributed profits---Levy of additional super-tax--¬Assessee owning sugar mill in East Pakistan---Restrictions on remittances of money from Pakistan to India---Money not received in India within period prescribed for declaration of dividends---Account books could not be brought from Pakistan ---Assessee obliged to appoint local auditor---Substantial liabilities incurred in India---Indian income not sufficient to declare dividends---Relevant circumstances for not declaring dividends within prescribed period---Indian Income-tax Act, 1922, S.23-A. The assessee-company owned a sugar mill in the erstwhile East Pakistan. During the assessment year 1960-61, accounting year ending on August 31, 1959, there were restrictions upon remittances from Pakistan to India. The books of the assessee for the said year showed a profit of Rs.93,449, after making provision for taxation in India and Pakistan. The Income-tax Officer, however, made an assessment on an income of Rs.6,92,441 and after deducting the tax payable thereon he arrived at the balance at Rs.3,80,842.55. He found that the assessee had not declared dividends within twelve months of the expiry of the accounting year. The assessee contended that it had declared the dividend of Rs.1,80,000 within forty-six days of the expiry of the aforesaid twelve months' period and that the delay had occurred on account of the fact that the account books could not be brought to India and that a local auditor had to be appointed, all of which took some time and that since the declaration and payment of dividends was conditional upon the Government of Pakistan allowing remittance facilities, and as the remittance was not possible, the dividends were not declared. The Income-tax Officer rejected the contentions of the assessee and levied additional super-tax on the undistributed balance of Rs.3,80,842.55 under section 23-A of the Indian Income-tax Act, 1922. The Appellate Assistant Commissioner dismissed the appeal filed by the assessee. On further appeal, the Tribunal found that the provisions contained in section 207 of the Companies Act, 1956, or for that matter the provisions contained in the proviso to…

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