GOBALD MOTOR SERVICE LIMITED Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE question referred to us is :"Whether the orders under Section 23A for the assessment years 1947-48 and 1949-50 are valid ?"

(2.) IT was contended in the appeal before the Appellate Assistant Commissioner that notwithstanding that a certain amount of profits over and above what was distributed as dividends was available, several income-tax assessments were pending against the company and that, therefore, the company could not have made payment of any divided larger than what it actually made. The Appellate Assistant Commissioner, though he appreciated the arguments advanced, was unable to accept that position. He referred to Sir Kasturchand Ltd. v. Commissioner of Income-tax and thought that section 23A did not provide for taking into consideration whether the company would have to meet any liabilities out of the profits available in its hands. He observed :

(3.) WE may refer to Ezra Proprietary Estates Ltd. v. Commissioner of Income-tax. That was a case of private limited company, whose main source of income was income from property. During the two accounting years 1938 and 1939, the company made profits of Rs. 30,000 and Rs. 15,000 and the whole of the profit was divided among the shareholders as dividends. The assessable income of the company during the two years was computed at over Rs. 1,20,000. It was contended by the department that since the company had not distributed among its shareholders at least 60 per cent. of the assessable income of the company, the order of the Income-tax Officer made under section 23A could not be disturbed. The learned judges observed :