TMI Blog1994 (11) TMI 48X X X X Extracts X X X X X X X X Extracts X X X X ..... profits under section 104 of the Income-tax Act, 1961, is not justified?" The facts leading to the reference are as follows: The assessee is a private limited company. The assessment year concerned is 1976-77 corresponding to the accounting year ending March 31, 1976. The assessee had a total income of Rs. 27,86,230. According to the Income-tax Officer, the assessee had a balance distributable income of Rs. 6,08,764. Section 104 of the Income-tax Act requires the assessee to declare and distribute 60 per cent. of this amount as dividend subject to the provisions of sections 105, 106, 107 and 107A. That means the assessee had to distribute an amount of Rs. 3,65,258 as dividend. But the assessee distributed dividend of only Rs. 1,10,250. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts of the future and similar others. The Income-tax Officer must take an overall picture of the financial position of the business. He should put himself in the position of a prudent businessman or the director of a company and deal with the problem with a sympathetic and objective approach. These principles were reiterated in CIT v. Asiatic Textiles Ltd. [1971] 82 ITR 816 (SC). It was with reference to these principles that the Tribunal came to the conclusion that the dividend distributed by the assessee-company was reasonable and that it was not liable for levy of any tax on the alleged undistributed dividend. The assessee had stated before the assessing authority when he called upon the assessee to show cause, that it did not have suff ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the close of the previous year. It was in the light of these circumstances and the circumstances relied on before the Income-tax Officer himself that the Commissioner held that the assessee acted prudently in not declaring any higher amount by way of dividend. These findings have been reiterated by the Tribunal as well. As stated in Gangadhar Banerjee's case [1965] 57 ITR 176 (SC), for considering whether the dividend declared was reasonable or not the Income-tax Officer has to put himself in the place of the assessee and consider whether as a prudent businessman the assessee could have declared a higher amount than what has been done. On the facts of this case, we are satisfied that the assessee has acted as any other prudent businessma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty for this decision to the facts of this case. The accounting period ended on March 31, 1976, and the declaration of the dividend would have been done only thereafter. It was with reference to the liabilities which admittedly existed as on the closing of this accounting period that the Tribunal came to the conclusion that the amount of dividend declared was reasonable. No event which took place subsequent to the declaration of the dividend has been taken into account for arriving at its decision. Another contention which was vehemently urged by standing counsel was that the plea based on the liabilities to income-tax, relied on by the Commissioner (Appeals) and the Tribunal, was not raised before the Income-tax Officer. This, according t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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