A.K.SENGUPTA, J. - (1.) IN this reference under section 256(2) of the INcome-tax Act, 1961, the following questions of law have been referred to this court for the assessment years 1955-56 and 1956-57: 1. Assessment year 1955-56 "Whether, on the facts and in the circumstances of the case, the Tribunal ignored relevant material or relied on irrelevant material to hold that there was no shortfall for the assessment year 1955-56 and was justified in that view in canceling the order under section 23A passed by the INcome-tax officer?" 2. Assessment year 1956-57 "Whether, on the facts and in the circumstances of the case, the Tribunal ignored relevant material or relied on irrelevant material to hold that there was no amount available for distribution as dividend for the assessment year 1956-57 and was justified in that view in cancelling the order under section 23A passed by the INcome-tax Officer?"
(2.) THE dispute relates to the legality of the order of the Income-tax Officer under section 23A. THE Income-tax Officer observed that less than 50% of the capital was held by the members of the public limited company. THE èfurther contention of the assessee was that after deducting sales tax, the amount available would not justify declaration of a higher dividend. THE Income-tax Officer, however, observed that the company itself had treated sales tax payment in the immediate future. Consequently, the dividend declared was not adequate. He, accordingly, levied super-tax at 37% amounting to Rs. 2,13,765.20 and Rs. 2,70,963.47, respectively, for the two years in question. The assessee went up in appeal to the Appellate Assistant Commissioner who, vide his consolidated order dated December 17, 1971 directed that the Income-tax Officer shall levy super-tax at 25% of the undistributed balance as reduced on appeal without allowing any deduction for sales tax liability as shown in para 14 of his order. Thereafter, the assessee came up in second appeal before the Tribunal which, vide its consolidated order for both the years in question, held that there was no shortfall in the assessment year 1955-56. Regarding the assessment order for the year 1956-57, there was no amount available for distribution as dividend. Therefore, the provisions of section 23A were not applicable at all.
(3.) BEFORE the Tribunal, the Departmental representative contended that the so-called outgoings and expenses are of personal nature and do not have the character of business outgoings. He, therefore, urged that the Departmental authorities were correctly justified in not deducting the so-called outgoings in determining the commercial profits available for distribution of dividends. He also reiterated that the actual tax assessed on the basis of the assessment orders should not be taken into account but the tax on the revised income after giving effect to the appellate order should alone be taken into account. So far as the assessment year 1955-56 is concerned, the Tribunal, found that the amount available for distribution of dividends for the assessment year 1955-56 was only Rs. 34,456 whereas the assessee had already declared a dividend of Rs. 60,000 and as such there was no shortfall in the assessment year 1955-56.;