COMMISSIONER OF INCOME-TAX, MADRAS vs SUNDARAM (PRIVATE) LTD. — 1971 PTD 456

Citation: 1971 PTD 456

Court: Madras High Court

Year: 1968

Decision Date: 1968-06-20

Parties: COMMISSIONER OF INCOME-TAX, MADRAS vs SUNDARAM (PRIVATE) LTD.

Headnotes

Case cited as 1971 PTD 456

Judgment Text

Court Name: Madras High Court Judge(s): K. Veeraswa mi, Ramaprasada Rao Title: COMMISSIONER OF INCOME-TAX, MADRAS vs SUNDARAM (PRIVATE) LTD. Case No.: Case No. 271 of 1964 Date of Judgment:1968-06-20 Reported As: 1971 PTD 456 Result: reference is answered JUDGMENT JUDGMENT VEERASWAM1, J.-The short point in this reference is whether distributable profit for purposes of section 23-A of the Indian Income-tax Act, 1922, would include notional dividend. We are concerned with the assessm ent year 1955-56. The assessee is a private limited company which was regularly assessed for that year in February 1956, on a total income of Rs. 67,680. Later finding that a sum of Rs. 1,666 was declared to be notional dividend in favour of the assessee by another company by name the Madras Motor Insurance Company Limited in which the assessee held shares, the assessm ent was reopened and in view of this notional dividend section 23-A was invoked and applied. The Appellate Tribunal, disagreeing with the departmental view, held that section 23-A proceeded on the assumption that the assessee had a balance of profit which it could distribute but failed to do so. Since the sum of Rs. 1,666, in fact, never came into the accounts of the assessee, the Tribunal was of the view that section 23-A could not be applied. We are of the view that section 23-A, having regard to its scheme and purpose, will not comprehend notional dividend as part of the total income available for actual distribution. A…

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