TMI Blog1979 (10) TMI 5X X X X Extracts X X X X X X X X Extracts X X X X ..... also relevant to state that the balance-sheet of the company as on March 31, 1958, showed a net profit of Rs. 18,950.98. The assessee was originally assessed for the assessment year 1959-60 (the relevant previous year being the year ended March 31, 1959) on a total income of Rs. 43,407. Thereafter, the ITO came to know that the assessee had been withdrawing moneys from the company, and in the belief that those amounts were liable to be treated as " dividend " under s. 2(6A)(e) of the Indian I.T. Act, 1922, he reopened the assessment by virtue of s. 147 of the I.T. Act, 1961. In the assessment proceedings which followed, the assessee claimed that the accumulated profits of the company amounted to Rs. 1,050 only, and that amount alone could be considered as " dividend " under s. 2(6A)(e). The figure was worked out on the basis that a sum of Rs. 11,000 as a provision for tax and of Rs. 6,900 as a provision for dividend had to be adjusted against the balance of Rs. 18,950 in the profit and loss account. The ITO rejected the contention of the assessee and determined a sum of Rs. 25,107 as dividend under s. 2(6A)(e). He arrived at this figure by including the current profits of the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny, not being a company, in which the public are substantially interested within the meaning of section 23A, of any sum (whether as representing a part of the assets of the company or otherwise) by way of advance or loan to a shareholder or any payment by any such company on behalf or for the individual benefit of a shareholder, to the extent to which the, company in either case possesses accumulated profits." The question is whether the profits earned by the company during the year in which the loans were advanced to the assessee, that is to say, the year current profits, can be regarded as included within the accumulated profits of the company. It will be noticed that the expression " accumulated profits " occurs in s. 2(6A)(c) of the Act. Construing that clause in Girdhardas Co. Ltd. v. CIT [1957] 31 ITR 82, 88, the Bombay High Court said : " The limitation imposed by the legislature is that the profits must in the first place be accumulated in contradistinction to the profits being current ........" The Madras High Court in CIT v. M. V. Murugappan and CIT v. A. M. M. V. Valliammai Achi [1966] 62 ITR 382 took the same view. It analysed the concept of " accumulated profit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... revenue that in the Twelfth Report of the Law Commission of India (p. 324, item 17), the authors of the report consider that the intention of the legislature was to include current profits in the expression " accumulated profits " in s. 2(6A) and that the present definition of " accumulated profits " by Expln. 2 to s. 2(22) of the I.T. Act, 1961, only clarifies what the true intent was all along. In the view which has found favour with us, we are not persuaded by that submission. Accordingly, we hold that the High Court was right in answering the first question in favour of the assessee and against the revenue. The second question is whether the provision for payment of tax and dividend can be taken into account when computing the accumulated profits as on March 31, 1958. The revenue contends that this question should not have been referred by the Appellate Tribunal to the High Court at the instance of the assessee because no reference application was made by the assessee. The only reference application, it is pointed out, before the Appellate Tribunal was the reference application filed by the CIT. We are of opinion that the revenue is right. The objection was taken by the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ference application. But, in every case, it is only the party applying for a reference who is entitled to specify the questions of law which should be referred. Nowhere in the statute do we find a right in the non-applicant (a phrase used here for convenience) to ask for a reference of questions of law on the application made by the applicant. In this connection, two categories of cases can be envisaged. One consists of cases where the order of the Tribunal under s. 254 has decided the appeal partly against one party and partly against the other. This may be so whether the appeal consists of a single subject-matter or there are more than one independent claim in the appeal. In the former, one party may be aggrieved by the grant of relief, even though partial, while the other may be aggrieved by the refusal to grant total relief. In the latter, relief may be granted or refused with reference to individual items in dispute, and accordingly one party or the other will be aggrieved. In either case, the party who is aggrieved and who desires a reference to the High Court must file a reference application for that purpose. It is not open to him to make a reference application filed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rly arise as further questions because they would be intimately involved in a decision on the questions referred at the instance of the applicant, but it failed to classify such a case separately from the case where a non-applicant seeks to raise independent and unassociated questions of law. Cases in which a distinction was noticed between the two categories but no opinion was expressed on the right of a winning party to raise questions of law without applying for a reference are CIT v. Jiwaji Rao Sugar Co. Ltd. [1969] 71 ITR 319 (MP) followed in CIT v.Dr. Fida Hussain G. Abbasi [1969] 71 ITR 314 (MP) and CIT v. K. Rathnam Nadar [1969] 71 ITR 433 (Mad). Some attention has been given to the distinction between the two categories in CIT v. A. K. Das [1970] 77 ITR 31, 44 (Cal). In the present case, the question whether the provision of Rs. 11,000 for tax and Rs. 6,900 for dividend can be taken into account when determining the accumulated profits as on March 31, 1958, is not related to the question whether accumulated profits can take in current profits. The two questions involve the grant of separate and distinct reliefs and the decision on one question does not affect the decisio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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