CHAKRAVARTTI, C. J. - (1.) THE short point involved in this referencehas been shortly put and I think I can dispose of it by a short judgment.
(2.) THE assessee, Indra Singh and Sons Ltd., is a private limited company and the year of assessment with which we are concerned is 1948-49.THE company's profit and loss account for the relative accounting yearshowed a net profit of Rs. 8,32,487. All that profit was, however, notprofits and gains of business. It included undoubtedly income frombusiness assessable under section 10, but it also included income from interest on securities assessable under section 8, income from property assessable under section 9 and income from dividends assessable under section 12. The Income-tax Officer determined the assessable income of the company at Rs. 14,58,954. That amount was made up of Rs. 4,65,141 assessed under section 10 as business income, Rs. 12,647 assessed under section 8 as interest on securities, Rs. 21,994 assessed under section 9 as income from property and Rs. 9,59,172 assessed under section 12 as dividend income. The company, however, did not make any declaration of dividend. The Income- tax Officer thought that this was a case where section 23A(1) applied and since it could not be said that the omission to declare a dividend had been caused either by losses incurred by the company in earlier years or by the smallness of the profit made, the undistributed portion of the assessable income, as computed for income- tax purposes and reduced by the amount of income-tax and super-tax payable should be deemed to have been distributed as dividend among the shareholders. The actual order made by the Income-tax Officer was that the assessable income of Rs. 14,54,727 reduced by Rs. 6,36,443 the same being the taxes payable in respect thereof, should be deemed to have been distributed as dividend at the date of the relevant general meeting. The discrepancy between the figure of Rs. 14,58,954 given in the statement of the case as the assessable income determined by the Income-tax Officer and the figure of Rs. 14,54,727 mentioned as the assessable income in the order under section 23A remains unexplained. The contention raised before the Income-tax Officer was that no order under section 23A(1) ought to be made, because the profit,contemplated by the expression " smallness of the profit made " in section 23A(1) was only the profit derived from business and assessable under section 10 of the Act and not the entire profits of the company from whatever source derived. The next branch of the argument was that if only the profits derived from business and assessed under section 10 were to be recorded, the profits in this case were really small enough to justify the action of the company in not declaring a dividend. The Income-tax Officer and after him the Appellate Assistant Commis- sioner and finally the Tribunal all held that the word " profit " as occurring in the expression " smallness of the profit made " in SECTION 23A(1) was not limited to profit derived from business, but covered the entire amount of the profit made by the company. The assessee not being satisfied with that decision asked for a reference to this court and the question in controversy has been referred in the following terms : "Whether the expression ' smallness of the profit made ' occurring in section 23A(1) means only trading or business profit assessable under section 10 of the Income-tax Act or it also includes income from interest on securities assessable under section 8, income from property assessable under section 9, and income from dividend assessable under section 12."
(3.) THE Tribunal in their appellate order answered the question against the assessee by relying upon the decision of this court in the case of Kilburn Properties Limited v. Commissioner of Income-tax (1). THEy did not overlook the fact that the true meaning of the word " profit " did not fal l to be considered in the case relied on but they held that since the decision was that section 23A(1) would apply to a company even if the whole of its income was derived from property assessable under section 9, the word " profit " in the expression " smallness of the profit made " could not exclude such income or indeed could not be said to exclude all income other than income from business. I do not think that the case referred to by the Tribunal does really answer the question raised in the case. It certainly creates a difficulty in the way of the assessee, because if section 23A(1) applies to all com- panies and if there be a company which is either a property-owning company or an investment company and thus a non-trading company, so that it has no income derived from business at all, it would be impossible to apply the section and consider whether the profit made was small or large, if the word " profit " did not cover any profit other than profit from business. Even so, however, it seems to me that the on raised by the present case did not arise directly for decision and what was held in the case cannot be said to be decisive on the question. Nor, it seems to me, is the case of Ezra Proprietary Estates Ltd. v. Commissioner of Income-tax(1), cited before us, of any assistance, because the expression " smallness of the profit made " did not fall to be construed even in that case. It would appear that practically the whole of the income of the assessee company in that case was income from property assessable under section 9 and only a negligible amount was derived as interest on deposits. In each of the two assessment years in question the whole of the profits had been distributed by the company as dividend but the Income-tax Officer had y et made an order under section 23A(1). In those circumstances, the only question which really arose for decision and the only question which the court really decided was whether the case could at all be taken as a case where an unreasonable proportion of the profits had been with- held from distribution as dividend or, to put it in another way, whether there was any evidence in support of the Income-tax Officer's finding that smallness of the profit made could not be said to be a reason for the company not distributing as dividend at least sixty per cent. of its assessable income. The court naturally held that since the company had, in fact, distributed the entire amount of the profits of each of the two years, it had no other money available for distribution and, therefore, there could be no possible reason for saying that the smallness of the profit made had not prevented the company from declaring a larger dividend or distributing a larger amount. The whole of the decision rests on that single point and it appears to me that no assistance can be derived from it so far as the question before us is concerned.;