Desai, J. - In this application three questions are sought to be referred to us under section 256(2) of the Income-tax Act, 1961. As far as the first question for the assessment year 1664-65 is concerned, Mr. Joshi has drawn our attention to the decisions reported in and 90 ITR 387. The question does require consideration by the High Court and, therefore, the Rule is made absolute as far as this question for the assessment year 1964-65 is concerned.
2. As far as the two subsequent questions for the assessment years 1965-66 and 1966-67 are concerned, Mr. Shah has drawn our attention to the assessment orders passed by the Income-tax Officer concerned, which show that there was no transfer by the Directors to any dividend reserves for payment of dividend nor was the amount of dividend paid from any dividend reserve. The Directors reports for these two years, which have been shown to us, as well as these orders make it clear that there were transfers to general reserve of much larger amounts and that dividends recommended by the Directors were to be paid out of the general reserve if and when approved by the shareholders at the annual general meeting.
3. The factual position then is one totally different than that envisaged in the questions for these two years. Mr. Joshi has drawn our attention to the order of the Tribunal which (para 2) does suggest that the three amounts did constitute dividend reserve for the three years in question. This will not cure the factual defects and it has been suggested by Mr. Joshi that the question may be reframed by the Court to bring out the real controversy had in fact been urged before the Tribunal and could be said to arise from the order of the Tribunal. The order of the Tribunal does not deal with the position as to whether these amounts can be properly said to form part of the capital of the company on the footing that there were appropriations to general reserve from which general reserve smaller amounts were recommended for payment as dividend by the Directors, which amounts ultimately were paid as dividend after necessary approval of the shareholders at the annual general meeting. For both these reasons then Questions Nos. 2 and 3 for the assessment years 1965-66 and 1966-67 respectively cannot be directed to be referred and the Rule in respect of these two questions will be required to be discharged. Ordered accordingly.
4. Parties will bear their own costs of this application.