K.L. Roy, J.
1. The assessee is limited company doing business as selling agents of a textile mill. For the assessment year 1955-56 the assessee was assesssd on a total income of Rs. 1,61,089. The taxes payable thereon were Rs. 69,973, leaving a distributable balance of Rs. 91,116. Forthe assessment year 1956-57, the total income assessed was Rs. 1,07,429 and the taxes payable thereon were determined at Rs. 46,668 leaving distributable balance of Rs. 60,761. The assessee-company did not declare any dividend either in respect of its accounting year for the assessment year 1955-56 or for the assessment year 1956-57. On being required by the Income-tax Officer to show cause why the provisions of Section 23A would not be applied to the assessee-company, the assessee claimed that, as it had suffered a loss of Rs. 11,88,000 in respect of 12,000 shares of Elphinstone Mills Ltd. of Bombay purchased by the assessee, it was not possible for reasonable for it to have declared any dividend in either of the two aforesaid years. In its income-tax assessment for the aforesaid two years, the assessee had claimed a loss of Rs 11,88,000 as loss in share dealings. This claim had been disallowed by the Income-tax Officer, the Appellate Assistant Commissioner and the Tribunal as it was found that the 12,000 shares in Elphinstone Mills Ltd. were purchased by the assessee at a price far in excess of the reigning market price in order to enable Messrs. Soorajmull Nagar mull, who were the managing agents of the assessee-company, to acquire the managing agency of the said Elphinstone Mills. The loss was held to be a capital loss and was disallowed as a deduction in the assessee's assessment to income-tax for the aforesaid two years. In the proceedings under Section 23A, the Income-tax Officer was of the opinion that the capital loss could not be taken into consideration in determining the assessee's commercial profits for either of these two years and accordingly, he passed orders under the aforesaid section levying additional super-tax on the undistributed balance for each of the two aforesaid years.
2. On appeal against the aforesaid order under Section 23A, the Appellate Assistant Commissioner accepted the assessee's contention with the following observation :
It cannot, however, be denied that there was an actual loss in the transactions, and, therefore, the appellate must be taken to have incurred that loss. In view of the fact that there was absolutely no commercial profit in the year of account which could warrant any application of the provisions of Section 23A of the Act, the provisions of the aforesaid section were not applicable in 1955-56 assessment. Similarly, if this loss is carried forward, the position in the assessment for the year 1956-57 would also be the same. In my opinion, therefore, the orders under Section 23A are not warranted by the circumstances in the two prevailing years under consideration.'
3. Dissatisfied with the aforesaid decision the department appealed to the Tribunal. Before the Tribunal the department representative contended that the loss arose in respect of 12,000 shares in Elphinstone Mills Ltd., and the loss had been held to be on capital account. He pointed out that theloss itself had not actually arisen but was only a notional loss in the sense that the shares were not parted with by the company and the loss arose only on the revaluation of the shares at the ruling market price on the last day of the corresponding accounting year. It was argued that variations in the value of any capital asset of a company were not normally recorded in the books of account and, at any rate, they could not be taken into account in determining its commercial profits. The Tribunal accepted the proposition that in determining the commercial profits, no account should be taken of a capital loss. It was, however, of the opinion that, in considering the reasonableness of the dividend to be declared under Section 23A, capital losses should also be taken into account. It dealt with the argument of the departmental representative that the loss claimed was only a notional loss and not a real loss in the following words :
' In this context we have to examine the argument of the departmental representative that the capital loss was only a notional loss. The income-tax authorities have taken the view that the shares in the Elphinstone Mills Ltd. were purchased at inflated rates because a part of the purchase price was paid for helping Messrs. Soorajmull Nagarmull to acquire the managing, agency of the mills. On that argument itself, we do not see how the loss can be called notional. On that basis there was no loss on the price paid for the shares because the ruling price at the time of the perchase and on the last day of the accounting year were nearly the same. But then the balance of Rs. 11,88,000 has been given over irretrievably by the company as a part of its contribution to help Messrs. Soorajmull Nagarmull to acquire their managing agency. To that extent, there was a depletion of the company's resources. This view of the matter has, however, not been upheld by the Tribunal and according to the Tribunal the shares were purchased at an inflated rate as investment shares and the correct value of the investment as on the last day of the accounting period involved the company in loss on account of depreciation of its investments. This depreciation in the value of its investments the company was entitled to record in its books of account on any commercial principle. We are, therefore unable to accept the contention of the departmental representative that the capital loss was a notional loss. Having held that the capital loss was not a notional loss it is still necessary to consider whether in spite of the capital loss it would be reasonable for the company to distribute the dividends.'
4. Ultimately, the Tribunal held that any distribution of dividends on the part of the company wonld have made inroads into the capital of the company for either of the years and it would be unreasonable to insist on the company declaring any dividend in these years. Accordingly the Tribunal up held the order of the Appellate Assistant Commissioner and dismissed the department's appeal.
5. At the instance of Commissioner the following question of low has been referred to this court by the Tribunal :
' Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that, in view of the capital loss of Rs. 12,00,000 suffered by the assessee on account of depreciation in the value of the shares of Messrs. Elphinstone Mills Ltd. payment of any dividend at all during any of the two relevant accounting years would have been unreasonable ?'
6. The Tribunal has recorded in the statement of the case that the department representative suggested that the question to be referred should bring out specifically the department's contention that the loss suffered by the assessee-company was only a notional loss and not a real loss. The Tribunal rejected the suggestion, as no such question had specifically been asked for by the department in its application under Section 66(1). This aspect of the matter would be relevant in dealing with the contention which Mr. Pal, appearing for the Commissioner, raised before this court.
7. In C ommissioners of Income-tax v. Gangadhar Banerjee and Co. (Private) Ltd., : 57ITR176(SC) , their Lordship of the Supreme Court quoted with approval the observations of the Judicial Committee of the Privy Council in Commissioner of Income-tax v. Williamson Diamongs Ltd.,  A.C. 41,  35 I.T.R. 290 (P.C.), that in considering the reasonableness of distribution of a dividend not only the past losses and smallness of profit in the current year need be considered but all other matters relevant to the question should also be taken into consideration. Capital losses, if established, would be one of them. In view of the approval of these observations by the Supreme Court, Mr. B. L. Pal fairly conceded that he could not argue that the Tribunal was in error in holding that payment of any dividend during any of the two relevant accounting years would have been unreasonable in view of the capital loss of Rs. 12 lakhs suffered by the assessee. He, however, contended that the question as referred to this court by the Tribunal assumes that the loss that arose to the assessee on account of depreciation in the value of the shares was a capital loss. Mr. Pal submitted that the tribunal was in error in holding that depreciation in the value of investments could lead to a loss until and unless the investments were realised. Until such realisation the loss is only a notional loss, or, as Mr. Pal put it, a paper loss, which could not be taken intoconsideration in determining the reasonableness of the declaration of dividendunder Section 23A. In our opinion, Mr. Pal is not entitled to raise theaforesaid contention. As we have already pointed out, this contention wasspecifically raised before the Tribunal by the departmental representative atthe hearing of the appeal but the Tribunal rejected that contention and held that the balance of Rs. 11,88,000 had been given over irretrievably by the company as a part of its contribution to help Messrs. Soorajmull Nagarmull to acquire the managing agency. To that extent there was depletion of the company's resources. The shares were purchased at an inflated rate as investment shares and the correct value of the investment as on the last day of the accounting period involved the company in loss on account of depreciation of its investment. This depreciation in the value of its investment the company was entitled to record in its books of accounts on any commercial principle. In asking for a reference under Section 66(1) the Commissioner never challenged that finding of the Tribunal. Though at the stage of the finalisation of the statement of the case the departmental representative wanted to raise such a question, the Tribunal rejected the prayer of the departmental representative. The Commissioner did not apply to this court under Section 66(2) for a direction on the Tribunal to refer such a question of law. In this state of affairs, Mr. Pal cannot be allowed to argue that the finding of the Tribunal, that Rs. 12 lakhs was a capital loss suffered by the assessee, was erroneous. It is now well settled by several decisions of the Supreme Court that, unless the Tribunal has referred a question under Section 66(1) or if on being asked the Tribunal refuses to refer a question and no application is made to the High Court to direct the Tribunal to refer such a question under Section 66(2), the High Court would have no jurisdiction to entertain a question not referred to it.
8. Mr. Pal did not dispute that if the loss of Rs. 12 lakhs was a capital loss then the Tribunal's decision that it would be unreasonable for the assessee-company to have declared any dividend in any of the two years under reference was correct. Accordingly, we must answer the question referred to this court in the affirmative and against the revenue.
9. The Commissioner will pay the costs of this reference.
10. I agree.