LexTHE COMMISSIONER OF INCOME-TAX, BOMBAY CITY, BOMBAY versus BIPINCHANDRA MAGANLAL AND CO. LTD., BOMBAY
Open in Lexace · Ask the AI about this caseJudgment (excerpt)
2 S.C.R. SUPREME COURT REPORTS
493
the High Court in the first instance, on a statement of
r96o
the case by the Tribunal.
5 1 b
.
Civil Appeal No. 143 of 1958, will, therefore, be dis- Suga: ~1~~1;
1 Ltd.
missed, but without any order as to costs.
v.
The Commissioner
0. A. No. 144 of 1958 allowed.
O. A. No. 143 of 1958 dismissed.
of Income-tax,
Central, Calrntta.
THE COMMISSIONER OF INCOME-TAX,
BOMBAY CITY, BOMBAY
. v.
BIPINCHANDRA MAGANLAL AND CO. LTD.,
BOMBAY
S. K. DAS, M. HIDAYATULI,AH and J. C. SHAH, JJ.
Income-tax-Profit and assessable income-Diff crcnce between
-Smallness of profit-How determined-Indian Income-tax Act,
z922 (II of I9zz), ss. IO (z) (vii) second proviso, 66(I).
The respondent company purchased certain machinery for
Rs. 89,000 and sold it for the same value, but in the books of
account the written down value of the machinery was shown in
the year of account as Rs. 73,392. The Income Tax Officer in
computing the assessable income of the company added the
difference, i.e. Rs. i5,608, between the actual value and the
written down value to the profit of the company. The Income
Tax Officer also passed an order under s. 23A of the Income Tax
Act, and directed that the undistributed portion of the assess-
able income, shall be deemed to have been distributed amongst
the shareholders as dividend. Appeals against the order of the
Income-tax Officer proved unsuccessful and the Appellate Tribu-
nal referred the following question to the High Court under
s. 66(1):-
"Whether the sum of Rs. I 5,608 should have been includ-
ed in the assessee company's "profit" for the purpose of deter-
mining whether the payment of a larger dividend than that
declared by it would be unreasonable."
The High Court answered the question in the negative. On
appeal by special leave,
Held, that the view takrn by the High Court was correct.
H idayatullah ].
November r7 •
494
SUPREME COURT REPORTS
[1961)
r960
By the fiction in s. 10{2}(vii) second proviso, read with
-
s. 2{6C), what is really not income is, for the purpose of com-
The Commissioner putation of assessable income, made taxable income: but on that
of Income~tax, account, it does not become commercial profit, and if it is not
Bombay City,
commercial profit, it is not liable to be taken into account in
Bombay
assessing whether in view of the smallness of profits a larger
v.
dividend would be unreasonable.
· Bipinchandra
"Smallness of profit" should not be equated with "small-
Maganlol &
Co .. ness of assessable income" but should be determined in accor-
Ltd., Bombay
dance with commercial principles.
Shah .f.
Sir Kasturchand Ltd. v. Commissioner of Income-tax, Bombay
City, (r949) XVII I.T.R. 493, Ezra Proprietary Estates Ltd. v.
Commissioner of Income-tax, West Bengal, (r950) XVIII I.T.R.
762 and Commissioner of Income-tax, Bombay City v. F. L. Smith
& Co. (Bombay) Ltd., (r959) XXXV I.T.R. r83, referred to.
CIVIL APPELLATE JURISDICTION:
Civil Appeal No.
761of1957.
Appeal by special leave from the judgment and
order dated February 24, 1955, of the former Bom-
bay High Court in I.T.R. 48/X of 1954.
Hardayal Hardy and D. Gupta, for the appellant.
N. A. Palkhivala and I. N. Shroff, for the respon-
dent.
1960. November 17. The Judgment of the Court
was delivered by
SHAH, J.-The Income Tax Appellate Tribunal,
Bombay Bench "A", referred under s. 66(1) of the
Indian Income Tax Act, 1922-hereinafter referred
to as the Act-the following question :
"Whether the sum of Rs. 15,608 should have
been included in the assessee Company's "profit" for
the purpose of determining whether the payment of a
larger dividend than that declared by it would be un-
reasonable ?"
The High Court answered the question in the nega-
tive. Against the ,prder of the High ~ou:t, wit!i
special leave under Art. 136 of the Constitution, this
appeal is preferred.
.
M/s. Bipinchandra Maganlal & Co., Ltd.-herem-
after referred to as the Company-is registered under
the Indian Companies Act. The Company is one in
2 S.C.R. SUPREME COURT REPORTS
495
which the public are not substantially interested with-
x960
in the meaning of s. 23A Explanation of the Act. Its Th c -. :
Paid-up capital at the material time was Rs. 20,800
0
•11 omm1Ss1•
0neF
ncome- ax,
made up as follows :
Bombay City
20 shares of Rs. 50 each fully paid up and 1980
Bombay
'
shares of Rs. 50 each, Rs. 10 being paid up per share.
v.
In December 1945, the CoExcerpt shown. Read the full judgment & AI analysis in Lexace.