COMMISSIONER OF INCOME TAX Vs. JASRUP BAIJNATH AND SONS P LTD

JUDGEMENT

(1.) This is a reference at the instance of the Commissioner of Income-tax, West Bengal. The

(2.) The relevant facts recorded in the statement of the case are as follows : The assessee, Messrs. Jasrup Baijnath Bahety & Sons Private Ltd., of 35, Cross Street, Calcutta, is a private limited company. The controversy relates to the assessment year 1957-58 for which the previous year was the calendar year 1956. The Income-tax Officer determined the total income of the company at Rs. 8,962. The share capital of the company, which stood at Rs. 3,84,000 at the beginning of the year, was reduced to Rs, 96,000 by the order of this court dated the 24th July, 1956. The reduction in capital thus amounted to Rs. 2,88,000. The company distributed amounts, in cash to the shareholders in consequence of such reduction. It is recorded in paragraph 5 of the statement of the case that the assessee-company was formerly carrying on the business of generation and supply of electricity at Khandwa, Madhya Pradesh. Since the electricity supply was taken over by the State Government, the assessee had practically no business and the share capital was in excess of the requirements of the company. The High Court ordered the reduction of capital in the following terms :

(3.) The Income-tax Officer found that there were accumulated profits to the extent of Rs. 97,399. In his order the Income-tax Officer records as follows :