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TMI Blog1970 (2) TMI 34X X X X Extracts X X X X X X X X Extracts X X X X ..... " Whether, on the facts and in the circumstances of the case, the sums of Rs. 39,725 and Rs. 17,921 were rightly treated as dividends paid to the two shareholders by the assessee-company within the meaning of section 2(6A)(e) of the Act ? " The short relevant facts are as follows : The assessee is a private limited company. In the assessment year 1957-58, the assessee-company paid Rs. 24,500 and Rs. 15,225 aggregating to Rs. 39,725 as loans to two of its shareholders. In the assessment year 1958-59 the assessee-company paid the sums of Rs. 11,500 and Rs. 6,421 aggregating to Rs. 17,921 as loans to two of its shareholders. The books of accounts of the assessee-company disclosed that in the assessment years 1956-57 and 1957-58, M. J. Raj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 . . . . " (Underlining is ours). The Income-tax Officer actually calculated the accumulated profits of the assessee-company from 1948-49 to 1956-57 at Rs. 57,995 as per Schedule " B " attached to the assessment order for the year 1957-58. The contention on behalf of the assessee-company in connection with the calculation of the figure of Rs. 57,995 as accumulated profits in the above Schedule " B " before the Appellate Tribunal was that the same had been arrived at by totalling up and/or addition of figures of assessed income in the assessment orders for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r calculating the profits of the company as per the provisions of the Act and also . . . . 'possession of the accumulated profits may be in the abstract only and not actual possession' and further 'now the profits as per the provisions of the Act can only be the assessed profits and not the book profits or the profits possessed, i.e., left with the assessee after making all sorts of disbursements'. " These findings are challenged in this reference. In that connection, Mr. Rajagopal has emphasised the fact that profits for the present assessment years were arrived at by disallowing the expenses of salaries in fact made by the company to the extent of Rs. 36,000 in the assessment year 1957-58 and Rs. 18,000 in the assessment year 1956-57. He ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld that the pharse " accumulated profits " in this section refers to the aggregate of the assessed income arrived at by disbursements and expenditures in fact incurred. There was no justification for the tax authorities and the Appellate Tribunal to proceed to arrive at the accumulated profits of the assessee-company by merely totalling up the income of the assessee-company as assessed by previous assessment orders. That the profits and/or income mentioned in these orders will not reflect the profits accumulated and in fact in the hands of the assessee-company is patent. This can be illustrated by referring to the fact of the disbursements and expenditure in fact incurred by the assessee-company for payment of salaries to the two directors ..... X X X X Extracts X X X X X X X X Extracts X X X X
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