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TMI Blog1995 (11) TMI 6X X X X Extracts X X X X X X X X Extracts X X X X ..... of is the year ending on August 31, 1959. The assessee owns a sugar mill and a farm attached to it in what was then the East Paksitan. At the relevant time there were restrictions upon remittances from Pakistan to India. The books of the assessee for the said year showed a profit of Rs. 93,449, after making provision for taxation in India and Pakistan. The Income-tax Officer, however, made an assessment on an income of Rs. 6,92,441. After deducting the tax payable thereon, he arrived at the balance at Rs. 3,80,842.55. He found that the assessee had not declared dividends within twelve months of the expiry of the accounting year. Accordingly, he levied additional super tax on the undistributed balance of Rs. 3,80,842.55 under section 23A. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e-tax Act. Thereupon, the Revenue asked for and obtained the aforesaid reference. When the reference came up for hearing before the High Court, it appears that no one appeared for the assessee. The High Court heard learned counsel for the Revenue and after referring to section 45 of the Income-tax Act and section 207 of the Companies Act, 1956, held that the reasons assigned by the assessee for not declaring the dividends within the prescribed period were not acceptable and that action was rightly taken against it under section 23A. The correctness of the said view is questioned in this appeal. Sub-section (1) of section 23A, as it obtained at the relevant time, read thus: " 23A. Power to assess companies to super-tax on undistributed in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o pay super-tax at the rate of fifty per cent, in the case of a company whose business consists wholly or mainly in the dealing in or holding of investments, and at the rate of thirty-seven per cent. in the case of any other company on the undistributed balance of the total income of the previous year, that is to say, on the total income as reduced by the amounts, if any referred to in clause (a), clause (b) or clause (c) and the dividends actually distributed, if any. " The object of this section is stated by this court in CIT v. Abdul Rahim Osman and Co. (India) Ltd. [19721 86 ITR 436 (SC) : This provision is procedural and applies only to companies in which the public are not substantially interested. It seems to have been enacted with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taxes payable by the company and in the case of banking companies the amount actually carried to a reserve fund under the statutory compulsion. " It may also be noticed that the provision contained in section 23A is stringent in nature and may have to be construed strictly. The main question in this matter is whether the reasons assigned by the appellant are relevant in law and adequate in the circumstances of the case. On this aspect, it is relevant to notice the decision of this court in CIT v. Gangadhar Banerjee and Co. (Pvt.) Ltd. [1965] 57 ITR 176, holding that clauses (i) and (ii) of sub-section (1) of section 23A were not exhaustive and that the Income-tax Officer has to and is entitled to look to all the relevant circumstances to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... financial position of the business. It is neither possible nor advisable to lay down any decisive tests for the guidance of the Income-tax Officer. It depends upon the facts of each case. The only guidance is his capacity to put himself in the position of a prudent businessman or the director of a company and his sympathetic and objective approach to the difficult problem that arises in each case. We find it difficult to accept the argument that the Income-tax Officer cannot take into consideration any circumstances other than losses and smallness of profits. This argument ignores the expression 'having regard to' that precedes the said words." This decision has been followed later in CIT v. Asiatic Textiles Ltd. [1971] 82 ITR 816 (SC). L ..... X X X X Extracts X X X X X X X X Extracts X X X X
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