P.B.Mukharji, J. - (1.) The statement of the case raises the following two points for an answer : "1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the statutory percentages applicable under Section 23A(1) of the Income-tax Act, 1922, to the distribution of dividends on 24th March, 1960, were 45 per cent. and 60 per cent. in respect of processing receipts and trading receipts respectively ?
(2.) Whether, on the facts and in the circumstances of the case, the shortfall in the distribution of dividend by the assessee was less than 5 per cent. of the total income as reduced by the amounts mentioned in Section 23A(1) of the said Act, and the assessee as such was entitled to a notice under Section 23A(2)(ii) thereof ? " 2. The facts giving rise to this question may be briefly summarised : The assessee, Bombay Photo Stores Pvt. Ltd., is a private limited company to which the provisions of Section 23A are applicable. In the present case, the assessment year is 1960-61 for which the previous year ended on June 30, 1959. The assessee's net profit accounts came up to Rs. 72,959. The Income-tax Officer determined the assessee's total income at Rs. 87,103 and tax payable thereon at Rs. 39,196, leaving a balance of Rs. 47,907 available for distribution as dividend. According to the Income-tax Officer, the effective statutory percentage applicable to the company was 57.5 per cent. and on this basis the minimum distribution of dividend required for complying with the provisions of Section 23A was Rs. 27,546. The actual distribution made by the company was Rs. 20,295. The shortfall was therefore more than 5% of the distributable surplus. The Income-tax Officer accordingly passed an order under Section 23A with the previous approval of the inspecting Assistant Commissioner of Income-tax levying additional super-tax @ 37 per cent. on the undistributed balance of Rs. 27,612. On appeal before the Appellate Assistant Commissioner, there was an interim order dated December 13, 1962, by which he asked for a report from the Income-tax Officer. The Income-tax Officer submitted his remand report on January 24, 1963.
(3.) The statement of the case also makes it clear that the assessee carried on two activities : (1) developing and printing, and (2) trading. The Income-tax Officer adopted 50 per cent. in respect of the first part and 65 per cent. in respect of the second part of the business and this resulted in the average statutory percentage 57'5 per cent. The assessee's contention then was that having declared a dividend of Rs. 20,295 in March, 1960, when the statutory percentages were 45 per cent. and 60 per cent., respectively, for these two activities, the average would be only 52.5 per cent. In fact the assessee claimed to be entitled to be given an opportunity for declaring additional dividends. The Appellate Assistant Commissioner negatived the contention and held that the statutory percentages would be 50 per cent. and 65 per cent. as enacted by the Finance Act of 1959 and therefore the assessee was not entitled to an opportunity to declare additional dividends. It was further held by the Appellate Assistant Commissioner that further distribution of dividends was not impossible. In the result, the Appellate Assistant Commissioner upheld the Income-tax Officer's order under Section 23A.;