MYSODET PRIVATE LIMITED Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) This is a reference under the Income-tax Act, 1961 and the question referred for our opinion is as follows:

(2.) The facts leading to this reference are as follows:-A sum of Rs. 1,23,053/- was paid to the Managing Director of the asscssee-company should be treated as dividend under Section 2(22) of the Income-tax Act, 1961 (in short the Act). If that amount is taken as a dividend distributcd then there will hardly be a balance of Rs, 2,800/- to be distributed and that is too small an amount compared to the paid up capital of the assessee-Company and as such the provisions of Section 104 of the Act are inapplicable.

(3.) The assessee is a trading company in which the public are not substantially interested. For the assessment year 1975-76, the company was assessed to tax on a total income of Rs. 6,27,430/-. The assessee not having distributed any dividends to its share holders, the Income-tax Officer initiated proceedings u/S.104 of the Act and on that basis levied an additional income-tax at 25% of the amount disallowed. The assessee appealed unsuccessfully both to the Appellate Assistant Commissioner and thereafter to the Tribunal. Aggrieved by the order of the Tribunal, at the instance of the assessee, the question of law set forth above has been referred for our opinion.