Commissioner of Income Tax vs Bachhraj and Co. Ltd.

The short point which arises for consideration in the present matter is whether Section 104 of the Income Tax Act, 1961, stood attracted to the facts of the case. The assessee is an investment company. It has persisted in not declaring the dividends. The assessee has made its investment in the UTI. It has invested Rs. 45.50 lakhs in the 1964 Unit Scheme. The directors of the company exercised their discretion in investing the said amount in the 1964 Unit Scheme, particularly, in view of the fact that the company is an investment company and, as found by the Tribunal, the object was not to evade tax, but to expand its investment business. In the case of Commissioner of Income Tax, West Bengal Vs. Gangadhar Banerjee and Co. (Private) Ltd., , the Supreme Court has observed that the Income Tax Officer acting u/s 104 is not assessing income to tax. He only does what the directors should have done. He puts himself in the place of the directors and that the yardstick to be applied should be that of a prudent businessman. Applying the ratio of the said judgment to the facts of this case, the Tribunal has come to the conclusion that the investment in units made by the assessee was in furtherance of a business activity of an assessee-company and no fault can be found against the assessee for expanding its business, rather than declaring dividends.

In the circumstances, we do not see any reason to interfere with the finding of fact recorded by the Tribunal. Appeal stands dismissed.