COMMISSIONER OF INCOME TAX Vs. GOODWILL INDIA LIMITED

JUDGEMENT

(1.) For the assessment year 1960-61, the question reproduced below has been referred to us. The question refers to the Income Tax Act, 1961 , but there appears to be a a misprint for 1922. So, we have taken the question as referring to the Indian Income Tax Act, 1922 . The question is :

(2.) To understand the question, it is necessary to refer to the fact that an order was passed under section 23A of the Indian Income Tax Act, 1922 , by the Income Tax Officer on the ground that 60 per cent. of the total income as assessed (distributable income) had not been distributed as dividend. The company being one in which the public was not substantially interested, the Income Tax Officer directed that super-tax amounting to Rs. 74,413 was payable by the company.

(3.) The order was affirmed by the Appellate Assistant Commissioner. On further appeal, the Tribunal held that the income as assessed was based on the change in the system of accounting effected by the assessed during the assessment year 1960-61, and, in fact the sum of Rs. 3,30,915 which was added to the assessable income as accrued finance charges had already been taken into consideration by the company for paying dividend to the shareholders in earlier years. It was observed that if the commercial profits of the company were taken into consideration after deducting the said sum of Rs. 3,30,915, then the distribution of dividends actually made to the shareholders in the accounting period relevant to this assessment year was reasonable within the meaning of section 23A, and hence no super-tax should be imposed. This has led to the reference to this court.