Ajit K. Sengupta, J. - (1.) These two references--one under Section 66(1) of the Indian Income-tax Act, 1922, and the other under Section 66(2) of the Indian Income-tax Act, 1922--relate to the assessment year 1959-60. Since both the references arise out of the same order of the Tribunal relating to one and the same assessment year, we propose to dispose of the two references by one judgment.
(2.) Shortly stated, the facts are as follows : During the year under consideration, the total income of the assessee was determined at Rs. 3,79,441 on which income-tax was assessed at Rs. 2,16,012 and as such the available surplus was Rs. 1,63,429. The assessee, however, declared dividend of Rs. 1,25,000. The Income-tax Officer held that the assessee was a company whose business consisted wholly in the holding of investments and therefore 100% dividend ought to have been declared. Accordingly, he held that Section 23A of the Indian Income-tax Act, 1922, was clearly applicable in this case. The assessee explained that the facts of the case did not warrant a larger distribution. It was claimed that there was a huge loan payable by the company, that the cash and bank balances were poor and that there was no sufficient liquid fund after meeting the cost of new construction. This explanation was not accepted by the Income-tax Officer and so he passed an order under Section 23A directing the assessee to pay super-tax at 50% on the balance surplus of Rs. 38,429, i.e., Rs. 19,214.50.
(3.) On appeal, the Appellate Assistant Commissioner upheld the conclusion of the Income-tax Officer as he was of the opinion that the conditions required for avoidance of an order under Section 23A(1) are the smallness of profits and losses of earlier years which did not exist in this case. He, therefore, held that this was a fit case for invoking the provisions of Section 23A(1) of the Indian Income-tax Act, 1922.;