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 year 1959-60 - While determining availability of profits for application of section 23A department did not allow deduction on account of donation made by assessee-company to an industrial company for charity - Tribunal disagreed with view of department and allowed assessee's appeal on ground that amount covered by donation was not actually available for distribution of dividend and would only have to come out of assessee's reserves, thus, levy of super-tax was as further payment of dividend not justified - Whether since there was no trace of any evidence or suggestion that donation in question had been made with a view to evade tax and that donation had not been actually paid out and to that extent profits of company had not been reduced, there was no infirmity in impugned order - Held, yes FACTS The assessee, a private limited company, was charged to tax on a total income of Rs. 7,15,366, the tax payable thereon being Rs. 3,97,562. After deducting profession tax of Rs. 1,689 the balance of the total income amounted to Rs. 3,16,115 of which 60 per cent should have been declared as dividend. That came to Rs. 1,89,669, but actually only Rs. 1,52,400 was distributed as dividend. The profit and loss account of the assessee exhibited a profit of Rs. 5,49,927. But this was arrived at after deducting the amount donated as charity to the industrial association. On the view that the donation was not outgoing for the purpose of earning the profits, the revenue held that it could not be allowed as a deduction and invoked section 23A(1). The Tribunal disagreed with that view and allowed the assessee's appeal on the ground that the amount covered by the donation was not actually available for distribution as dividend and, as further payments of dividend would only have to come out of the assessee's reserves, the levy of super-tax was not justified. The Tribunal also adverted to section 15B and the policy underlying it, as being in support of its view. On reference : HELD It might be noted…

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