TMI Blog1998 (1) TMI 38X X X X Extracts X X X X X X X X Extracts X X X X ..... circumstances of the case, the Tribunal's finding that a larger distribution of dividend by the assessee was not possible is based on valid and relevant materials and is a reasonable view to take on the facts of the case?" 2. The assessee is a private limited company carrying on the business of production of steel castings. The assessee in respect of the previous year ended on 31st March, 1976, relevant to the asst. yr. 1976-77 filed a return admitting a total income of Rs. 1,38,230. The ITO completed the assessment on 31st Dec., 1977 determining the total income at Rs. 1,49,990. The ITO found that the distributable income of the assessee-company for the previous year ended on 31st March, 1976 amounted to Rs. 59,580 and the assessee, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led the order passed by the ITO under s. 104 of the Act. 4. The Department went into appeal before the Tribunal and the Tribunal found that the creation of a reserve cannot be said to be extravagant and the deposit of a sum of Rs. 10,000 in a bank was reasonable and, therefore, the Tribunal came to the conclusion that a larger distribution of dividend was not possible on the facts of the case, and accordingly, dismissed the appeal filed by the Revenue. 5. The Revenue has challenged the order of the Tribunal and on the basis of the directions of this Court, two questions of law set out above have been referred to for our consideration. 6. Learned counsel for the Revenue submitted that the Tribunal was not correct in holding that a l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ustified by business considerations, such as the previous losses, the present profits, the availability of surplus money and the reasonable requirement of the future and similar other considerations. An overall picture of the financial position of the business should be taken into account before levying the additional tax under s. 104 of the Act on the company. The facts of the instant case show that the assessee had a total fixed assets amounting to Rs. 3,46,550, whereas the paid-up capital and reserve at the beginning of the year was found to be Rs. 2,87,615. The fact that the fixed capital exceeded the paid-up capital shows that there was a liability and it was found that the overall liability of the company by way of unsecured loans amo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... did not have sufficient liquid reserves to pay the shortfall in the distribution of dividend. In our view, the finding of the Tribunal is not in any way perverse or arrived at without any material. The Tribunal noticed the overall financial position of the company and then came to the conclusion that the larger distribution of dividend that was declared was not possible. Though a sum of Rs. 70,000 was transferred to the reserve, the Tribunal gave a plausible reason for the transfer of the same to the reserve. Therefore, we are of the view that the finding arrived at by the Tribunal is based on the materials on record and merely because there was a commercial profit of Rs. 1,56,789 as against the assessed income of Rs. 1,49,990, it cannot be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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