COMMISSIONER OF INCOME TAX Vs. AMALGAMATIONS P LIMITED

JUDGEMENT

(1.) THIS reference arises out of the proceedings under Section 23 A of the Indian Income-tax Act, 1922, for the assessment year 1960-61. The assessee is a holding company which has several subsidiaries. It is a company in which the public are not substantially interested. The relevant previous year ended on 30th June, 1959. When the Income-tax Officer considered the application of Section 23A to this company, he had already made an assessment on it for the relevant year on a total income of Rs. 25,79,508. After deducting the taxes and outgoings, there was a distributable surplus, out of the assessable income, of Rs. 18,12,622. On the basis that the assessee is a company whose business consisted wholly or mainly in the holding of investments, the assessee should have distributed 90% of the aforesaid distributable surplus, which came to Rs. 16,31,360. The assessee had, however, declared only a sum of Rs. 7,80,000 as dividend. The Income-tax Officer, therefore, considered that the provisions of Section 23A were attracted to this case and he, accordingly, passed an order levying additional super-tax on a sum of Rs. 10,32,622 (Rs. 18,12,622--Rs. 7,80,000) at the rate of 50% resulting in a tax liability of Rs. 5,16,311.

(2.) THE assessee appealed to the Appellate Assistant Commissioner. By the time he came to dispose of the appeal against the order under Section 23A, he had already disposed of the appeal against the assessment, as a result of which the total income had been reduced to Rs. 19,51,411. After deducting the taxes and other outgoings, there was a distributable surplus of Rs. 10,52,525. Before him the assessee contended that the statutory percentage of distribution applicable to it was only 65 and not 90 and that, alternatively, looking to its profits in the commercial sense, it could not have declared a larger dividend. If 65% alone had to be distributed, it was enough for it to have declared Rs. 7,03,641.25, and as it had declared Rs. 7,80,000 as dividends, the levy of additional super-tax would not have been attracted. THE Appellate Assistant Commissioner rejected the contention that the statutory percentage was only 65 and not 90. He held also that the company had enough commercial profits and that it could not be said that the distribution it had made had exhausted the commercial profit.

(3.) THE third question does not, in our opinion, require to be answered, as any answer to it could only be of an academic interest. If for instance we uphold the application of Section 23A, then the additional super-tax would have to be levied on the distributable balance of the total income minus the tax and other outgoings provided in Section 23A(1). THE figures in question No. 3 would, in that event, have no relevance. If, on the other hand, we hold that Section 23A is not applicable, then the point regarding exclusion of the two amounts in question would not arise. THE company would have declared reasonable dividends so as to be out of the operation of the levy of additional super-tax, notwithstanding the correctness or otherwise of the view of the Tribunal regarding the two amounts mentioned in the question. In these circumstances, we return the third question unanswered.