COMMISSIONER OF INCOME TAX Vs. POPULAR KURIES LIMITED

JUDGEMENT

(1.) THIS is a petition under Section 256(2) of the Income-tax Act, 1961. The assessment year is 1982-83. The assessee is a public limited company engaged in the business of conducting kuries. The original assessment was completed on September 9, 1982. Subsequently, a notice under Section 148 of the Income-tax Act was issued to the assessee on March 27, 1985. According to the Income-tax Officer, an amount of dividend payable as per the balance-sheet as on December 31, 1981, in a sum of Rs. 63,29,335 included dividends on forfeited tickets and dividends forgone by defaulted prized or bid ticket holders. The officer took the view that forfeited dividends were never distributed among the subscribers on termination of kuries. The forfeited dividends thus became part of the assets of the company. The Income-tax Officer brought to tax a sum of Rs. 1,24,812 as income of the year. The officer considered the balance amount of Rs. 5,56,188 as liable to be included in the total income in view of Section 41(1) of the Income-tax Act, as the amount of dividend payable has ceased to be a liability in the absence of any claimants. Accordingly, he passed annexure "A" assessment order. The assessee took up the matter in appeal without success. In second appeal, the Tribunal held against the departmental action taken by the Income-tax Officer for reassessment. Thereupon the Department filed an application under Section 256(1) of the Act before the Appellate Tribunal to refer the following questions to this court :

(2.) WHETHER, on the facts and in the circumstances of the case and on an interpretation of Section 41(1) of the Income-tax Act read with Motilal Ambaidas v. CIT [1977] 108 ITR 136 (Guj) and CIT v. Marikar (Motors) Ltd. [1981] 129 ITR 1 (Ker), the Tribunal is right in law in holding that in the absence of a case being made out that any deduction was allowed in respect of Rs. 5,56,600 and Rs. 71,623, the addition of the amounts cannot be justified under Section 41(1) of the Income-tax Act ?