GENERAL TALKIES LIMITED Vs. INCOME TAX OFFICER

JUDGEMENT

(1.) THE challenge in this petition is to the orders passed by the CBDT dated May 24, 1969, under s. 107A of the INCOME TAX ACT, 1961 (hereinafter called " the Act "), and the order dated March 16, 1973, passed by the ITO, Company Circle, New Delhi, under S. 104 of the Act.

(2.) THE petitioner is a company incorporated under the Indian Companies Act, 1956, and is carrying on the business 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 asst. yr. 1967 -68 was finalised on an income of Rs. 6,41,473. By virtue of S. 109 of the Act, the assessee was required to distribute 90per cent 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 ITO issued a notice under S. 104 of the Act asking the assessee to explain as to why the requisite amount of dividend had not been declared.

(3.) IN response to the notice received from the ITO under S. 104 of the Act, it was brought to the notice of the ITO that the petitioner had applied for a reduction in the minimum distribution of income under S. 107A of the Act. The ITO was requested to take into consideration the law laid down by their Lordships of the Supreme Court in CIT vs. Gangadhar Banerjee & Co. [1965] 57 ITR 176 (SC). It was mentioned that the ITO could take into consideration the reasonableness of the amount distributed taking into consideration the previous losses, the present activities and the availability of the surplus money and the reasonable requirements of the future. The ITO, however, did not consider the reasons to be satisfactory and levied additional tax under S. 104 at the rate of 37 per cent of Rs. 48,052 which was considered to be the difference between Rs. 2,18,016 and Rs. 1,69,964.