Commissioner of Income Tax vs Nawn Estate Pvt. Ltd.

Ajit Kumar Sengupta, J.—At the instance of the Commissioner of Income Tax, West Bengal-V, the following question of law has been referred to this court u/s 256(2) of the Income Tax Act, 1961, for the assessment year 1960-61 :

"Whether, on the facts and in the circumstances of the case, the Tribunal erred in holding that the payment by the assessee of a larger dividend than that declared would have been unreasonable and in that view cancelling the order made u/s 23A of the Indian Income Tax Act, 1922 ?"

It is not necessary for us to go into the question referred to us in view of the facts stated hereafter.

The Tribunal has recorded in the statement of case as follows :

"Learned counsel appearing on behalf of the respondent-company has drawn our attention to his petition dated July 4, 1973, in order to bring to our notice, the subsequent event that the Appellate Assistant Commissioner, by his order dated March 24, 1977, set aside the assessment for the assessment year 1960-61 and directed the Income Tax Officer to make the assessment afresh in accordance with law and after completion of the enquiries mentioned above. According to him, the present reference application would be of no value and relevance for the Revenue."

Inasmuch as the Appellate Assistant Commissioner, by the order dated March 24, 1977, set aside the assessment for the assessment year 1960-61 and directed the Income Tax Officer to make the assessment afresh in accordance with law and after completion of the enquiries, we are of the view that this reference has now become academic.

Even otherwise, having regard to the facts and circumstances of this case and having regard to the principles laid down by the Supreme Court in the case of Commissioner of Income Tax, West Bengal Vs. Gangadhar Banerjee and Co. (Private) Ltd., and the decision of this court in the case of COMMISSIONER OF Income Tax, WEST BENGAL I Vs. BANGODAYA COTTON MILLS LTD., , in the matter of distribution of dividends, a company can legitimately be expected to look into the various outgoings to judge the situation in its reality and not merely to look to its business profits.

We, therefore, decline to answer the question which has been referred to us.

There will be no order as to costs.

K.M. Yusuf, J.

I agree.