TMI Blog1971 (3) TMI 12X X X X Extracts X X X X X X X X Extracts X X X X ..... n 109 of the Income-tax Act, 1961. For the assessment year 1963-64 relating to the previous year ending on August 16, 1962, the company was assessed to income-tax by the first respondent, the Income-tax Officer, Company Circle, Trivandrum, by his order, exhibit P-1, dated November 30, 1967. Its total income was determined at Rs. 2,66,770 ; and the tax payable was determined at Rs. 30,357. Section 205 of the Companies Act, 1956, provides as follows : " No dividend shall be declared or paid by a company for any financial year except out of the profits of the company for that year arrived at after providing for depreciation in accordance with the provisions of sub-section (2) or out of the profits of the company for any previous financial ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of section 104 of the Income-tax Act, 1961, as they stood at the relevant time, provide as follows : " 104. Super-tax on undistributed income of certain companies.-(1) Subject to the provisions of sub-section (2) and of sections 105, 106 and 107, where the Income-tax Officer is satisfied that in respect of any previous year the profits and gains distributed as dividends by any company within the twelve months immediately following the expiry of that previous year are less than the statutory percentage of the distributable income of the company of that previous year, the Income-tax Officer shall make an order in writing that the company shall, apart from the sum determined as payable by it on the basis of the assessment under section 143 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income from dividend whereof is exempt under section 11. " " Distributable income " is defined in section 109(i) ; and " statutory percentage " is defined in section 109(iii) of the Income-tax Act. The first respondent considered that the fact that the company did not make any profits according to its balance-sheet or that it is prohibited by section 205 of the Companies Act from declaring any dividend from its profits without providing for depreciation as required by the said section does not affect the liability to be assessed under section 104 of the Income-tax Act. He accordingly obtained the approval of the second respondent, the Inspecting Assistant Commissioner of Income-tax, Range 1, Ernakulam, for proceeding against the company u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich has distributed dividends out of its profits and gains in the previous year ; and that the petitioner-company cannot be assessed under the above provision, as it has not distributed any such dividend. This argument is based on the phraselogy employed in the first part of sub-section (1). From a reading of the whole of this sub-section, it is clear that the charge thereunder is on the amount of short distribution of the statutory percentage of the distributable income. The contention of counsel for the company would lead to the result, that if the company distributed any dividend, it would be liable to pay the tax on the difference between the statutory percentage of the distributable income and the amount it distributed ; but if it did ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the statutory percentage of the distributable income which has not been distributed as dividends, and that the question whether the whole or any part of the statutory percentage of the distributable income is permissible under law to be distributed is not relevant. He submits that the failure to distribute may be due to negligence, deliberate omission or any legal bar. Section 105 may not apply to a case of legal bar ; and in any event it does not affect the liability to assessment under section 104(1). I do not propose to decide this question, as the third point raised by counsel for the company is one which involves the exercise of discretion by the Income-tax Officer on the facts and circumstances of the case. That is a matter which ..... X X X X Extracts X X X X X X X X Extracts X X X X
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