9911796707
TMI Blog1984 (2) TMI 202X X X X Extracts X X X X X X X X Extracts X X X X ..... the relevant previous years, that is, within 31-12-1977 for the assessment year 1977-78 and 31-12-1978 for the assessment year 1978-79. But it had declared dividend before the assessment orders were passed. For the assessment year 1977-78 it had declared and paid a dividend of Rs. 2,42,000 on 30-4-1979. For the assessment year 1978-79 it had declared and paid on 16-5-1980 a dividend of Rs. 2,26,875. The assessee argued in vain before the income-tax authorities that in a case where proper dividends were declared and paid before the date of order under section 104, which provision is penal in character, the ITO should desist from passing an order under that section, and argued similar to the finding of the Calcutta High Court in CIT v. Vegetable Products Ltd. [1971] 80 ITR 14 to the effect that unless on the day penalty is being levied some amount of tax remains outstanding or payable by the assessee, no penalty can be imposed at all, and which judgment was later upheld by the Supreme Court in CIT v. Vegetable Products Ltd. [1973] 88 ITR 192. The income-tax authorities held the view that dividend declared after the expiry of 12 months from the end of the accounting year has only to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pen it, cannot make an assessment in cases where the dividend has actually been declared and paid before the date of his order...." and argued that that proposition expounded by the Supreme Court about the jurisdiction of the ITO will hold the field and the Parliament in the subsequent statutory amendment has left that proposition untouched and undisturbed and that the amendment was only to provide a method for the computation of distributable income in cases where a section 104 order can be lawfully passed by the ITO. However, we are not going into this particular question because we think that this case is governed by the Tribunal decision, where there is reasonable cause for the failure within twelve months. The assessee has various branches and units. So consolidation of accounts has become a difficult task. The assessee has been expressing this great difficulty experienced in the finalisation of accounts even for the year 1972. The assessee had furnished in the paper book a chart about the dates of various events from 1972 onwards like general body meeting, date of directors' report, etc. The assessee had also made available the annual report for years beginning from 1972. Wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 2,74,436 for the assessment year 1977-78 and Rs. 3,12,707 for the assessment year 1978-79. Of course for the assessment year 1977-78 the protection provided under section 105 of the Act is available as the shortfall is within the permitted range of 10 per cent. But the assessee contested the correctness of the working of distributable income. The ITO for the assessment year 1977-78 worked it out as follows: Assessment year 1977-78 (Year ended 31-12-1976) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... --------- Distributable income as per ITO's order: 4,57,393" ------------- 6. The assessee wants the following more deductions: "Less: Transferred to general reserve (statutory as per section 205(2A) of the Companies Act, 1956) 26,000 Reserve for bad and doubtful debts 44,710 Gratuity disallowed 3,68,604 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax 13,44,662 Disallowances made in the adjustment statement 26,105 Donations 39,687 Bad debts disallowed 18,567 Disallowance under section 40A(8) 20,000 14,49,021 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bsp; 3,45,485 Less: Interest on income-tax debited to prior period adjustment account 71,704 Inadmissible disallowed in the adjustment statement not taken into account by ITO 10,000 81,704 ---------- --------- Distributable income: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and for the assessment year 1978-79 on 31-3-1981, whereas dividend was declared on 16-5-1980. The figure allowed by the ITO as deduction is the tax assessed on 31-3-1981. But that figure was not available on 16-5-1980. So the distributable income for purposes of dividend declaration has to be worked out on the basis of the provision in the accounts. The other items of general reserve are also deductible as stated for assessment year 1977-78. The other two items also fall under section 109(i)(g)(4) of the definition of distributable income. Interest payment, though it was for the previous periods, was paid only in August 1977 and it is, therefore, a revenue expenditure of the current year, though not allowable in income-tax assessment. So the distributable income is only Rs. 2,63,781. So this is a case where more dividends had been declared. Also in any event, the additional income-tax leviable is only 37 1/2 per cent of this distributable income of Rs. 2,63,781. 11. However, we will take it that these are not deductible in the computation of distributable income. Even then we have to go into the question of smallness of profit---Chaturvedi and Pithisaria's Income-tax Law, Third e ..... X X X X Extracts X X X X X X X X Extracts X X X X
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