UNION OF INDIA Vs. HINDUSTAN SUGAR MILLS LIMITED

JUDGEMENT

(1.) THE main point, which has to be determined in this appeal under clause 10 of the Letters Patent against a judgment of a learned single judge is whether the cost of machinery on board a ship on the high seas and which has been ordered by an assessee can be regarded to fall within the expression fixed assets which is to be found in proviso (b) to sub-section (1) of section 23A of the Indian Income-tax Act, 1922.

(2.) THE facts have been set out fully in the judgment of the learned single judge and need only be briefly recapitulated. THE respondent, the Hindustan Sugar Mills Limited, carries on the business of manufacturing sugar and its by-products. For the assessment year 1955-56, which covered the period from 1st July, 1953, to 30th June, 1954, a net distributable surplus of Rs. 20,94,195 was left out of its income. Out of this amount, a sum of Rs. 9,25,000, which came to 45 per cent. of the distributable surplus was in fact distributed as dividend to the shareholders. In June, 1955, the respondent moved the Commissioner of Income-tax under section 23A(3) seeking exemption from declaring a further dividend on the grounds, inter alia, that the value of its fixed assets came to Rs. 81,17,459, whereas its accumulated profits amounted to Rs. 79,08,699, and that it was entering into a scheme of considerable development of its business for which a large part of distributable surplus was required. THE Commissioner of Income-tax declined to accede to the prayer and the respondent was directed to distribute an additional dividend to the extent of Rs. 5,75,000. Under section 23A(4) the board of referees agreed with the Commissioner and in this manner the respondent was required to distribute by way of dividend a total amount of Rs. 16,00,000, out of the distributable surplus of Rs. 20,94,195.