HINDUSTAN SUGAR MILLS LIMITED Vs. UNION OF INDIA

JUDGEMENT

(1.) THE petitioner, the Hindustan Sugar Mills Limited, is engaged in the manufacture of sugar and its bye-products. Its total income for the accounting year July 1, 1953, to June 30, 1954, was Rs. 37,02,444. Taxes payable on this amount came to about Rs. 16,08,250. This left distributable surplus of Rs. 20,94,195, out of which Rs. 9,25,000, which is 45 per cent. of the distributable surplus, was the amount distributed as dividend. THE assessment year is 1955-56.

(2.) ON June 28, 1955, the petitioner moved an application before the Commissioner of Income-tax under sub-section (3) of section 23A of the Income-tax Act, 1922, that it may be exempted from declaring a further dividend, than what it had declared already out of the distributable surplus, for the assessment year 1955-56, on the grounds (a) that the value of the fixed asset comes to Rs. 81,17,459, whereas its accumulated profits, at the relevant time, came to Rs. 79,08,699, which figure is obviously less than the figure proceeding it, and (b) that it was entering into a scheme of considerable development of its business and needed large part of the distributable surplus to finance that. The Commissioner of Income-tax by his order of March 9, 1956, and, on reference by him under sub-section (4) of section 23A, the board of referees by its order of January 16, 1957, did not accept those two grounds and the petitioner was ordered to declare additional dividend to the extent of Rs. 5,75,000 which additional amount for this purpose was considered reasonable by the authorities. The dividend already declared and this additional dividend that was ordered to be declared come to the amount of dividend of Rs. 16,00,000 out of distributable surplus of Rs. 20,94,195, and this amount of the dividend is thus slightly less than 75 per cent. of the distributable surplus.

(3.) THERE remains the other aspect of the matter disposed of by the Commissioner of Income-tax and the board. It has regard to their opinion that the resources and the funds of the petitioner are sound enough to meet the cost of its development programme as it expands. On this question obviously on merits there can be no interference in a petition like this except in those cases in which the conclusion is based on no evidence, or it is a conclusion which no judicial mind would arrive at, or it is a conclusion which is partly based on relevant and admissible material and partly not so in which case it becomes difficult to say to what extend the basis of the conclusion is the relevant and admissible material and the conclusion drawn from it on the question of the capacity of the petitioner to finance its development programmed no such infirmity has been pointed out in regard to it as referred to above. But what has been pointed out is that the decision of the board of referees in considering the petitioners application under section 23A proceeds on the basis that the total distributable surplus of the petitioner is available for dividend, and the learned counsel for the petitioner points out that now the position taken by the petitioner has been found to be correct that only 60 per cent. of its distributable surplus is available for dividend. The learned counsel contends that if the board had been of this opinion it might well have come to a different decision on the application of the petitioner or in any case it cannot be said that it would have called upon the petitioner to make available the same percentage for further dividend of its distributable surplus as has been done. This is obvious for the board was, when making an order on the application of the petitioner, considering that the whole of the distributable surplus of the petitioner is available as dividend, whereas the basis on which it ought to have and could have proceeded was that only 60 per cent of that was available for the purpose.