Dipak Kumar Sen, J.
1. This reference is at the instance of Messrs. Panama Private Ltd., Calcutta, the assessee. The question called for from the Tribunal under Section 66(2) of the Indian Income-tax Act, 1922, is as follows :
'Whether, on the facts and circumstances of the case, the Tribunal was right in holding that the provisions of Section 23A of the Income-tax Act were applicable for the year '
2. The matter arises out of an order passed by the Income-tax Officer under Section 23A of the Indian Income-tax Act, 1922, in the assessment year 1961-62, the relevant previous year ending on 30th September, 1960. It is found that in the said assessment year the distributable surplus available to the assessee within the meaning of Section 23A was Rs. 2,45,793. It is further found that dividend aggregating to Rs. 1,06,950 has been distributed and this amount was less than the statutory percentage and the dividend which ought to have been distributed was Rs. 1,59,765. Accordingly, the Income-tax Officer levied an additional super-tax on the balance of the distributable surplus.
3. The assessee, being aggrieved by this order of the Income-tax Officer, preferred an appeal to the Appellate Assistant Commissioner. It was contended by the assessee before the Appellate Assistant Commissioner that if the demands under Section 23A of the Indian Income-tax Act in respect of earlier years were taken into account the available surplus would be only Rs. 1,20,649 and not the figure as worked out by the Income-tax Officer. It was also argued that tax under Section 23A should be levied only after deducting the sum of Rs. 1,01,113 which represented the liability under the said Section 23A for the earlier years. Such contentions were rejected by the Appellate Assistant Commissioner who upheld the order of the Income-tax Officer.
4. There was a further appeal to the Tribunal by the assessee. It was contended before the Tribunal on behalf of the assessee that the provisions of Section 23A could not be applied for the assessment year in question, that the tax levied under Section 23A in the earlier years should be taken into account and the directors of the company had the said tax in contemplation when dividend was declared in the meeting held on 29th June, 1961. It was contended further that it would be unreasonable for the directors to distribute all the profits without providing for the accrued demands under Section 23A.
5. It was contended on behalf of the revenue, on the other hand, that there was nothing to show that the directors of the assessee took into account liabilities accrued under the earlier orders under Section 23A. It was disputed that the liability under Section 23A for the earlier years could be deducted at all. The Tribunal found that the directors' report for the relevant year in question apparently did not take into account the accrued demands under Section 23A. The Tribunal concluded that the assessee was trying to utilise the existence of such demands as an ex post facto justification for the dividends declared. The Tribunal held that the Income-tax Officer was right in excluding the super-tax payable under Section 23A for other years. The Tribunal came to the conclusion that the amount of the dividends distributed for the said assessment years was not reasonable in the context of the available profits and it was held that Section 23A was rightly applied in the said year.
6. Mr. S. Sen, learned counsel for the revenue, has contended before us that Section 23A has specifically enjoined exclusion of all super-tax payable under the said section. The relevant part of the said section is quoted as follows:
'23A, Power to assess companies to super-tax on undistributed income in certain cases.--(1) Where the Income-tax Officer is satisfied that in respect of any previous year the profits and gains distributed as dividends by any company within the twelve months immediately following the expiry of that previous year are less than the statutory percentage of the total income of the company of that previous year as reduced by,--
(a) the amount of income-tax and super-tax payable by the company in respect of its total income, but excluding the amount of any super-tax payable under this section ;
(b) the amount of any other tax levied under any law for the time being in force on the company by the Government or by a local authority in excess of the amount, if any, which has been allowed in computing the total income ; and......'
7. Mr. Sen submitted that in view of such specific exclusion provided for in the said section it was not open to the taxing authorities to take that very exclusion into account in making any order under the section. In support of his contention Mr. Sen relied on a decision of the Supreme Court in the case of Bhor Industries Ltd. V. Commissioner of Income-tax : 42ITR57(SC) . In that case one of the questions which was referred and was considered by the Supreme Court was as follows:
'2. Whether in making an order under Section 23A in respect of the profits and gains of the year 1946-47, the assessable income of that previous year is to be reduced not only by the amount of income-tax and super-tax payable by the company in respect thereof but also by the amount of interest charged to it in accordance with the provisions of Section 18A '
8. The Supreme Court held that in ascertaining the amount due to be distributed no deduction could be made in respect of the interest charged under Section 18A, Interest chargeable under Section 18A(8) was interest and not tax. As Section 23A permitted deduction only of income-tax and super-tax no deduction could be made in respect of this interest.
9. Dr. D. Pal, learned counsel for the assessee, on the other hand, has relied on two decisions of this court. The first decision is in the case of Cooch Behar Trading Co. Pvt. Ltd. v. Commissioner of Income-tax : 112ITR150(Cal) . It was laid down in that case that irrespective of what the directors of an assessee may or may not have done the Income-tax Officer acting under Section 23A of the Act must consider what a prudent director would have done. Though the directors may not have anticipated the particular liability, an additional tax liability, at the time dividend was declared but if that liability is brought to the notice of the Income-tax Officer when the latter is proceeding under Section 23A, the same must be taken into consideration in view of the various decisions of the Supreme Court, namely, the case of Commissioner of Income-tax v. Gangadhar Banerjee and Co. (P.) Ltd. : 57ITR176(SC) and the case of Commissioner of Income-tax v. Asiatic Textiles Ltd. : 82ITR816(SC) .'
10. The other decision of this court relied on by Dr. Pal on behalf of the assessee was in the case of Clive Buildings (Calcutta) Ltd. v. Commissioner of Income-tax : 102ITR650(Cal) . It was observed in that case that though liability for wealth-tax would not be allowable as deduction under Clause (b) of Section 23A(1) of the Indian Income-tax Act, 1922, but this should be taken into consideration in examining whether larger dividend should have been declared having regard to the profits made which should be computed after taking into consideration the liability for wealth-tax.
11. We have carefully considered the respective submissions of the parties. It appears to us that the law is well settled by the decisions of the Supreme Court. It is beyond question now that the dividend if at all to be declared has to be distributed out of the commercial profits. The available commercial profits are to be computed after taking into account the entire financial performance of the company for the year. The ultimate question which will have to be gone into is whether there was enough money in the till of the company justifying distribution of any or higher dividends.
12. The interpretation of Section 23A which Mr. Sen invites us to accept, it appears, cannot be reconciled with the subsequent and successive interpretations of the said section by the Supreme Court. We have in mind the case of Gangadhar Banerjee : 57ITR176(SC) and also the case of Gobald Motor Service (P.) Ltd. v. Commissioner of Income-tax : 60ITR417(SC) , Therefore, we are unable to accept such interpretation.
13. On the facts found, it is not possible to ascertain whether the dividends declared, were reasonable or unreasonable. This question will be determined by the Tribunal. The matter is remanded back to the Tribunal for determination on further evidence, if necessary. The law to be applied has been indicated earlier. The Tribunal will afford opportunity to the parties to be heard afresh.
14. There will be no order as to costs.
15. I agree.