COMMISSIONER OF INCOME TAX Vs. JASRUP BAIJNATH BAHETY AND SONS PRIVATE LTD.

JUDGEMENT

(1.) This is a Reference at the instance of the Commissioner of Income -tax, West Bengal: The statement of the case raises two questions for answer by this Court. They are:

(2.) The relevant facts recorded in the statement of the case are as follows: The Assessee M/s, 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 July 24, 1956. The reduction in capital thus amounted to Rs. 2,88,000. The company distributed amounts in cash to the share -holders in consequence of such reduction. It is recorded in para. 5 of the statement of the case that the Assessee company was - formerly carrying on 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: