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TMI Blog1972 (9) TMI 39X X X X Extracts X X X X X X X X Extracts X X X X ..... stributing any dividend, the Income-tax Officer should have taken into account the losses suffered up to the last day of the 12 months following the end of the previous year as distinct from up to the date of the general meeting ? " The relevant assessment year in the present case is the year 1956-57. In this year, the income of the assessee-company was determined at Rs. 89,922. The previous year for this assessment year ended on November 12, 1955. The general meeting of the company was held on July 12, 1956. In this meeting no dividend was declared. Inasmuch as the assessee had not declared any dividend for the relevant assessment year, the Income-tax Officer issued a notice under section 23A of the Act, asking it to show cause as to why ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Appellate Assistant Commissioner came to the conclusion that on the date when the general meeting was held the assessee's financial position was sound and the directors on that date could not have contemplated that the sale of shares could result in a loss and that there was no justification for the company in not distributing any dividend out of its distributable profits. In view of these findings, the Appellate Assistant Commissioner dismissed the appeal. The assessee thereafter filed an appeal before the Income-tax Appellate Tribunal. The Tribunal took the view that in proceedings under section 23A, the Income-tax Officer has not only to take into account circumstances existing as on the date of the general meeting but also the circu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in the total income of such shareholder for the purpose of assessing his total income." It will be seen that the Income-tax Officer can take action under section 23A after the expiry of a period of six months from the date on which the accounts of the assessee of the previous year are laid before the company in its general meeting and further that less than 60 per cent. of the assessable income of the company of the previous year as reduced by the amount of income-tax and super-tax payable by the company has not been distributed among the shareholders. This by itself, however, does not entitle the Income-tax Officer to pass an order under section 23A, as he has thereafter to consider as to whether having regard to the losses incurred by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le requirements of the future and similar others. He must take an overall picture of the 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." In Comm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar Banerjee & Co. (Private) Ltd., the Income-tax Officer had assessed the total income of the assessee at Rs. 2,66,766 and after making a deduction for income-tax and super-tax, he held that a sum of Rs. 1,51,902-7-0 was available for distribution to the shareholders as dividends, and inasmuch as the assessee had distributed only Rs. 44,000 as dividend he passed an order under section 23A. Subsequently, on appeal, the assessee's income was reduced by Rs. 80,926, even though the amount of Rs. 44,000 distributed as dividend was less than 60 per cent. of the net income of Rs. 1,64,440 as reduced in appeal. Their Lordships, after defining the jurisdiction of the Income-tax Officer and the scope of enquiry in these proceedings, held that the net ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decision about the declaration of dividends. In the present case, it has been found that a large number of shares were purchased subsequent to the annual general meeting, and that the first sale of shares resulting in a loss also took place subsequent to the annual general meeting. In the circumstances, it cannot be predicated that the directors of the company while taking a decision not to distribute any dividends, had taken into account the possibility that shares would be purchased and sold in future, and that losses would be incurred in such a transaction. If such facts could not have been in the contemplation of the directors or the company while making the decision not to distribute any dividend, the Income-tax Officer while adjudging ..... X X X X Extracts X X X X X X X X Extracts X X X X
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