TMI Blog1967 (8) TMI 34X X X X Extracts X X X X X X X X Extracts X X X X ..... e of Rs. 91,116. For the assessment year 1956-57, the total income assessed was Rs. 1,07,429 and the taxes payable thereon were determined at Rs. 46,668 leaving distributable balance of Rs. 60,761. The assessee-company did not declare any dividend either in respect of its accounting year for the assessment year 1955-56 or for the assessment year 1956-57. On being required by the Income-tax Officer to show cause why the provisions of section 23A would not be applied to the assessee-company, the assessee claimed that, as it had suffered a loss of Rs. 11,88,000 in respect of 12,000 shares of Elphinstone Mills Ltd. of Bombay purchased by the assessee, it was not possible for reasonable for it to have declared any dividend in either of the two a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccount which could warrant any application of the provisions of section 23A of the Act, the provisions of the aforesaid section were not applicable in 1955-56 assessment. Similarly, if this loss is carried forward, the position in the assessment for the year 1956-57 would also be the same. In my opinion, therefore, the orders under section 23A are not warranted by the circumstances in the two prevailing years under consideration." Dissatisfied with the aforesaid decision the department appealed to the Tribunal. Before the Tribunal the department representative contended that the loss arose in respect of 12,000 shares in Elphinstone Mills Ltd., and the loss had been held to be on capital account. He pointed out that the loss itself had not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e purchase and on the last day of the accounting year were nearly the same. But then the balance of Rs. 11,88,000 has been given over irretrievably by the company as a part of its contribution to help Messrs. Soorajmull Nagarmull to acquire their managing agency. To that extent, there was a depletion of the company's resources. This view of the matter has, however, not been upheld by the Tribunal and according to the Tribunal the shares were purchased at an inflated rate as investment shares and the correct value of the investment as on the last day of the accounting period involved the company in loss on account of depreciation of its investments. This depreciation in the value of its investments the company was entitled to record in its b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notional loss and not a real loss. The Tribunal rejected the suggestion, as no such question had specifically been asked for by the department in its application under section 66(1). This aspect of the matter would be relevant in dealing with the contention which Mr. Pal, appearing for the Commissioner, raised before this court. In Commissioners of Income-tax v. Gangadhar Banerjee and Co. (Private) Ltd, their Lordship of the Supreme Court quoted with approval the observations of the Judicial Committee of the Privy Council in Commissioner, of Income-tax v. Williamson Diamongs Ltd., that in considering the reasonableness of distribution of a dividend not only the past losses and smallness of profit in the current year need be considered b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rajmull Nagarmull to acquire the managing agency. To that extent there was depletion of the company's resources. The shares were purchased at an inflated rate as investment shares and the correct value of the investment as on the last day of the accounting period involved the company in loss on account of depreciation of its investment. This depreciation in the value of its investment the company was entitled to record in its books of accounts on any commercial principle. In asking for a reference under section 66(1) the Commissioner never challenged that finding of the Tribunal. Though at the stage of the finalisation of the statement of the case the departmental representative wanted to raise such a question, the Tribunal rejected the pra ..... X X X X Extracts X X X X X X X X Extracts X X X X
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