TMI Blog1949 (3) TMI 27X X X X Extracts X X X X X X X X Extracts X X X X ..... d in none of these general meetings any dividend was declared and therefore no dividend was distributed. Now it would appear that the profits according to the accounts of the company for the accounting year 1940-41 was ₹ 35,155, for the accounting year 1941-42 was ₹ 29,882, and for the accounting year 1942-43 was ₹ 13,778. On assessment the profits were assessed by the Income-tax Officer at ₹ 48,586 for 1941-42, ₹ 82,233 for 1942-43 and ₹ 61,872 for 1943-44. The Income-tax Officer made an order under Section 23A(1) of the Income-tax Act on the 20th of May, 1946, for the previous year 1940-41 and on the 18th of May, 1946, for the following two years that the sums of ₹ 34,610, ₹ 56,170 and ͅ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 60 per cent. rather than the fact of distribution at all. If Mr. Kolah's contention was sound it would lead to this absurd result that if one per cent. or quarter per cent. of the assessable income of the company was distributed the section would apply, but if no part of the assessable income was distributed the section would have no application. A court must always avoid as far as possible giving an utterly absurd interpretation to a section drafted by the legislature unless a Court looking to the plain and grammatical language used has no other option except to give such a construction. But in this case I am satisfied that the legislature has not used such language as necessarily to drive the Court to so anomalous a conclusion. Theref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of a dividend or a larger dividend than declared would be unreasonable, and he has to be satisfied as to the reasonableness or unreasonableness of the payment of a dividend or a larger dividend only with reference to two factors mentioned in that section, and those two factors are: losses incurred in the previous year, or the smallness of the profit. Both these factors are absolute in their nature and they have got to be judged per se without reference to any other factor that might be present. It is significant to note, because it has some bearing on the construction of the operative part of the section, that the legislature has used the language payment of a dividend or a larger dividend , which clearly implies that the company may no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any. Whereas the company has got to declare more than 60 per cent. of the assessable income of the company in order to escape the consequences laid down in Section 23A, in determining whether an order should be made or not under that section, the Income-tax Officer has got to consider not the assessable income of the company but the actual profits made by the company. It is hardly necessary to emphasise the very great distinction that may exist between the assessable income of the company and the actual accounting profits made by the company, and what the Income-tax Officer has got to consider is the actual accounting profits made by the company and not the profits assessed to income-tax or super-tax by the Income-tax Officer. Therefore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... down the period of limitation after which no order can be made under Section 23A. Therefore the order under Section 23A is clearly not barred. One other question has been suggested by the assessee and in respect of which a Notice of Motion has been taken out, and that question is whether the profits made by the company in the relevant years were so small as to make it unreasonable for a declaration of a dividend and so as not to attract the application of Section 23A of the Act. Now, in my opinion, whether the losses incurred by the company in earlier years or the smallness of the profit made is such as to make the payment of a dividend or a larger dividend than that declared unreasonable, is one entirely for the satisfaction of the Inc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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