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TMI Blog2009 (7) TMI 28X X X X Extracts X X X X X X X X Extracts X X X X ..... er on the facts and in the circumstances of the case, the Tribunal was right in holding that the provisions of Section 104 of the I.T. Act were applicable even to a company which had not declared any dividend?" 2. "Whether on the facts and in the circumstances of the case, the Tribunal was right in holding, in spite of the commitments of the company, that the profits of the assessee-company for the assessment year 1984-85 were not small within the meaning of 'Smallness of profits' in Section 104 (2) of the IT Act and declaration of dividend by the company would have been reasonable?" 2. The Assessing Officer resorted to provision of Section 104(1) of the Act and applied the statutory rate of tax stipulated thereunder on the ground that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the nature of unsecured loans as well as loans and advances shown on the assets side of the balancesheet, it does not appear to be a sufficient ground for not declaring dividend. It is also not clear as to when loans were required to be repaid. As regards the plea that the profit left with the assessee was very small, we do not find any substance therein because, as we have seen, net profit carried to the profit and loss appropriation account amounted to Rs.3,07,952/-, which cannot be said to be a meager amount for the purposes of declaring dividend." 4. We have heard learned counsel for the parties and perused the record. 5. Section 104 of the Act is reproduced below:- "104 (1) Subject to the provisions of this Section and of sections 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the company is throughout the previous year beneficially held by an institution or fund established in India for a charitable purpose the income from dividend whereof is exempt us/11." 6. A perusal of the above shows that once satisfaction is arrived at that the profits distributed as dividend were less than the statutory profit, statutory rate of tax could be invoked, except in a case, which falls in one of the three clauses of sub section (2). The Tribunal having held, on facts, that case of the assessee did not fall under sub section (2) of Section 104 of the Act and that the assessee failed to declare dividend in terms of sub section (1), the invocation of statutory rate could not be held to be beyond the provisions of Section 104 of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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