TMI Blog1986 (8) TMI 53X X X X Extracts X X X X X X X X Extracts X X X X ..... ss of distribution as well as exhibition of films. The petitioner-company is controlling certain cinemas in Delhi and in Uttar Pradesh. Its only business is exhibition of motion pictures and is not engaged in any trading or manufacturing activity. The assessment for the relevant assessment year 1967-68 was finalised on an income of Rs. 6,41,473. By virtue of section 109 of the Act, the assessee was required to distribute 90% of its distributable income as dividend. The distributable income according to the petitioner being Rs. 2,18,016, the assessee had to distribute at least Rs. 1,96,215. However, it distributed only Rs. 1,69,964. The distribution, therefore, fell short by Rs. 26,251. The Income-tax Officer issued a notice under section 10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds pressed to reduce the minimum distribution as required under section 104 of the Act. The application for review filed before the Board was also dismissed by order dated May 1, 1970. In response to the notice received from the Income-tax Officer under section 104 of the Act, it was brought to the notice of the Income-tax Officer that the petitioner had applied for a reduction in the minimum distribution of income under section 107A of the Act. The Income-tax Officer was requested to take into consideration the law laid down by their Lordships of the Supreme Court in CIT v. Gangadhar Banerjee Co. [1965] 57 ITR 176. It was mentioned that the Income-tax Officer could take into consideration the reasonableness of the amount distributed ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 14, 1965, decided that suitable renovation and remodelling thereof be carried out which would be commercially advantageous to the company. Accordingly, the renovation of Nishat Talkies at Kanpur was taken up during the previous year relevant to the assessment year 1967-68 and a sum of Rs. 1,34,654-51 had to be spent on that account. Renovation of the stage and furniture of Majestic and jubilee cinemas was also taken up during the said previous year and sums of Rs. 49,722-83 and Rs. 52,475 respectively were spent up to March 31, 1967. These figures have been supported by the annexures annexed to the petition. It has further been pleaded that the false ceiling in the auditorium of Nishat Talkies in Lucknow was changed at a cost of Rs. 13,388- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndian Income-tax Act, 1922, which is similar to section 104 of the Income-tax Act, 1961. The Supreme Court noticed an earlier decision of the Division Bench of the Bombay High Court in Sir Kasturchand Ltd. v. CIT [1949] 17 ITR 493. In that case, it was held that the reasonableness of the payment of dividend or a larger dividend has to be adjudged only with reference to the two factors mentioned in that case vis-a-vis loss incurred by the company in earlier years or smallness of profits. The Supreme Court, however, did not accept the said decision and held at pages 181 and 182 of 57 ITR: " The Income-tax Officer, acting under this section, is not assessing any income to tax: that will be assessed in the hands of the shareholder. He only do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rimarily for the directors of a company. The Income-tax Officer can step in under section 23A(1) only if the directors unjustifiably refrain from declaring dividend. If the directors of a company had reasonable grounds for not declaring any dividend, it is not open for the Income-tax Officer to constitute himself as a super-director. " In both the aforesaid decisions, it has been held that the provisions being penal provisions, the burden is on the Department to prove that a larger dividend could be declared by the assessee. Applying the principles laid down, it appears that the Income-tax Officer has completely ignored the same and has passed a non-speaking order. It is not possible for this court to come to the conclusion that the Incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceable and as such he could not place the same before me. In the circumstances, it has to be taken that full material was available before the Income-tax Officer and in any case, the Income-tax Officer could ask for any further particulars from the assessee in response to the reply to the show-cause notice wherein basic facts were pleaded. It appears that no oral hearing was given to the assessee and no further records were looked into. The Income-tax Officer does not even seem to have looked into balance-sheet or profit and loss account. No reason has been assigned as to why there was a departure from the years 1965-66 and 1966-67 in which this benefit was granted to the petitioner-company. In the circumstances, there is no reason to hold ..... X X X X Extracts X X X X X X X X Extracts X X X X
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