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TMI Blog1967 (8) TMI 34X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 aforesaid years. In its income-tax assessment for the aforesaid two years, the assessee had claimed a loss of Rs, 11,88,000 as loss in share dealings. This claim had been disallowed by the Income-tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rried 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 actually arisen but was only a notional less in the sense that the shares were not parted with by the company and the loss arose only on the revaluation of the shares at the ruling market price on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essrs. 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 books of account on any commercial principle. We are, therefore unable to accept the contention of the departmental representative that the capital loss was a notional loss. Having held that the capital ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter 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 but all other matters relevant to the question should also be taken into consideration. Capital losses, if established, would be one of them. In view of the approval of these observations by the Supreme Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 prayer of the departmental representative. The Commissioner did not apply to this court under section 66(2) for a direction on the Tribunal to, refer such a question of law. In this state of affairs, Mr. Pal ca ..... X X X X Extracts X X X X X X X X Extracts X X X X
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