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Commissioner of Income-tax Vs. Ganges Mfg. Co. Ltd. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtKolkata High Court
Decided On
Case NumberIncome-tax Reference No. 361 of 1975
Judge
Reported in[1982]133ITR404(Cal)
ActsIncome Tax Act, 1961 - Sections 34(3), 154 and 155(5)
AppellantCommissioner of Income-tax
RespondentGanges Mfg. Co. Ltd.
Advocates:S.C. Sen and ;S. Banerjee, Advs.
Excerpt:
- .....case, the tribunal was justified in holding that no part of the amount credited to the development rebate reserve account could be said to have been utilised by the assessee for distribution by way of dividend or profit ?'2. this reference relates to the assessment year 1962-63. the facts found by the ito were as follows :3. the assessee had been allowed development rebate for this assessment year amounting to rs. 17,07,973 for which it had also created the necessary reserve. however, on march 31, 1963, the assessee transferred a sumof rs. 6,01,000 from the development rebate reserve to its general reserve and, thereafter, it transferred a sum of rs. 3,00,000 from the general reserve to the profit and loss appropriation account for the declaration of dividends. the ito took the transfer.....
Judgment:

Sabyasachi Mukharji, J.

1. In this reference under Section 256(1) of the I.T. Act, 1961, the following question has been referred to this court:

'Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that no part of the amount credited to the development rebate reserve account could be said to have been utilised by the assessee for distribution by way of dividend or profit ?'

2. This reference relates to the assessment year 1962-63. The facts found by the ITO were as follows :

3. The assessee had been allowed development rebate for this assessment year amounting to Rs. 17,07,973 for which it had also created the necessary reserve. However, on March 31, 1963, the assessee transferred a sumof Rs. 6,01,000 from the development rebate reserve to its general reserve and, thereafter, it transferred a sum of Rs. 3,00,000 from the general reserve to the profit and loss appropriation account for the declaration of dividends. The ITO took the transfer of Rs. 6,01,000 from the development rebate reserve to the general reserve and the diversion thereafter of Rs. 3,00,000, from the general reserve for the purpose of declaration of dividends, as an infringement of Section 34(3) of the I.T. Act to justify the withdrawal of the development rebate already granted. He, hence, initiated proceedings under Section 155(5) read with Section 154 of the I.T. Act, 1961. The assessee explained that the development rebate was, in fact, utilised for the purpose of business, namely, for the purpose of plant and machinery and repayment of loans taken from the National Industrial Development Corporation. It was submitted that the general reserve already had anold balance of Rs. 76,50,000 and the amount transferred to the profit and loss appropriation account was from that balance. The ITO did not accept either of these contentions. According to him, the proper thing to be done in the matter was to apportion the total sum of Rs. 12,21,303 declared as dividends over Rs. 3,00,000 transferred for the purpose and the old balance in the general reserve account. The ITO arrived at the conclusion that the sum of Rs. 47,520 as what had to be deemed to come of Rs; 3,00,000 transferred and on that basis he found the amount of development rebate to be withdrawn as Rs. 63,336.

4. The AAC, however, was unable to agree with the ITO. When the matter went up before the Tribunal, the Tribunal found that it was not necessary for their purpose to consider the legality of the proceedings initiated under Section 155(5) read with Section 154 of the I.T. Act, 1961, as even on merits the assessee's case appeared to be unassailable. The Tribunal found as follows:

5. There was admittedly a substantial amount of Rs. 76,50,000 in the general reserve and even without any transfer of amount from the development rebate reserve the sum declared as dividends could well have been taken from the, general reserve. The Tribunal further observed that simply because to the general reserve was added during this year a sum of Rs. 3 lakhs for the development reserve it was not possible to hold that the said transferred amount was also utilised for the purpose of declaring dividends. The Tribunal held that, in fact, even after the declaration of the dividends there was much more in the general reserve than what had been transferred to it from the development rebate reserve. It, therefore, saw no merit whatever in the departmental contention that there was in this case a transfer from the development rebate reserve to the general reserve for the purpose of making available amounts for distribution of dividends nor did it find anything to justify the conclusion that in fact there had been any such distribution of dividends with amounts that had been earmarked as development rebate reserve.

6. In the aforesaid circumstances, the Tribunal confirmed the order of the AAC. In that background, the question indicated above has been referred to us.

7. Now, the facts found by the Tribunal are purely questions of fact. The question posed before us has not challenged those findings of facts as either perverse or being based on no evidence, nor challenged the propriety of the said findings.

8. In that view of the matter, the answer to the question is self-evidentand the question must be answered in the affirmative and in favour of theassessee.

9. In the facts and circumstances, there will be no order as to costs.

Sudhindra Mohan Guha, J.

10. I agree.


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