COMMISSIONER OF INCOME TAX Vs. ROSHAN LAL

JUDGEMENT

(1.) THIS reference has come to us at the instance of the Commissioner of Income-tax. The question of law referred by the Income-tax Appellate Tribunal is:

(2.) THE assessment year is 1956-57, L. Roshan Lal, sines deceased, was a shareholder in the company, Messrs. Ram Chaudra and Sons Sugar Mills (F.) Ltd., during the previous year relevant to the assessment year 1956-57 as well as during the assessment year. THE company advanced to him a sum of Rs. 74,642 between November 1, 1953, and November 23, 1966, THE net income of the company after taking into account the losses of the earlier years for the relevant accounting year was Rs. 1,52,827. After providing for income-tax liability the amount available with the company in the form of profits on October 31, 1955, was Rs. 82,642. October 31, 1955, was the date on which the previous year of the company ended. Subsequently, on June 18, 1956, the annual general meeting of the company was held and at that meeting the accounts of the year ending October 31, 1955, were passed, and Rs. 74,560 was declared as dividend. THEse are the facts which appear from the statement of the case.

(3.) THE answer to the question, therefore, will depend on the question whether the accumulated profit of the company is the amount available for distribution by way of profits at the time the amount is lent to a shareholder by the company or it is the amount which remains after deducting from the total amount of profits the dividend which may subsequently be declared by the company.