Judgment

HIDAYATULLAH, J. : This is an appeal against the judgment and order of the High Court of Bombay dated August 3, 1956, in a reference under S. 66 (1) of the Indian Income-tax Act by the Appellate Tribunal, Bombay. The Tribunal referred four questions for the decision of the High Court. The High Court did not answer the first question because it was not pressed, and answered the remaining in the negative, after modifying them. It has certified this case as fit for appeal to this Court, and hence this appeal. The Commissioner of Income-tax. Bombay City is the appellant, and the Khatan Makanji Spinning and Weaving Company Limited, Bombay (the assessee Company) is the respondent.

2. The assessee Company has its year of account ending June 30 every year. At the close of the account year 1951, it carried forward profits amounting to Rs. 30,680/- In that year, it appears it had earned a rebate by declaring dividends below the limit fixed by the Finance Act. For the account year 1952 its book profits were Rs. 28,67,235/- less allowances for depreciation and tax. After these and other sundry adjustments, the balance available for distribution was Rs. 5,02,915/-. It may be pointed out