TMI Blog1981 (9) TMI 84X X X X Extracts X X X X X X X X Extracts X X X X ..... it then stood ? (2) If the answer to question No. 1 is in the affirmative, whether, on the facts and in the circumstances of the case, and considering the profits available for distribution, the provisions of section 23A(1) of the Indian Income-tax Act, 1922, were rightly applied in the assessee's case ? (3) Whether the order under section 23A(1) of the Indian Income-tax Act, 1922, is vitiated by the fact that it was passed after completing the regular assessment on the, assessee-company without issue of notice under section 34 of the said Act ? " The point in controversy relates to the application of s. 23A of the Indian I.T. Act, 1922, to the assessee-company. The ITO passed orders under s. 23A(1) in the assessee-company's case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e first place that s. 23A of the Indian I.T. Act, 1922, was not applicable. The AAC, however, rejected the submissions of the assessee and upheld the conclusion of the ITO, namely, that the assessee was a company to which the provisions of s. 23A are technically applicable. In discussing the merits, the AAC upheld the application of the provisions contained in s. 23A, although he was satisfied that by not declaring dividend the assessee-company was not seeking to avoid tax. In, his view, the circumstances clearly indicated that the shareholders concerned had formed the assessee-company not with a view to earn profits. He concluded further that there was no attempt at avoidance of super-tax liability . Nevertheless, according to him, these a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the court is required to consider the position from the point of view of a prudent businessman. In this particular case, we have also to consider the object of this company, and the object was clearly not to earn profits but to run the newspaper which was being run prior to the partition. It was also to furnish an avenue, of employment to displaced persons. It has been observed by the Tribunal and this finding is binding on us that the press was old and there was necessity to purchase a new press. Indeed, the machinery for the new press was purchased in 1964 at a cost of Rs. 60,000. In these circumstances, the allocation to general reserve must be regarded as properly done and is required to be upheld if prudent business considerations a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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