Judgement

RAMASWAMI, J.:- This appeal is brought by certificate, from the judgment of the Bombay High Court dated May 3/4, 1963 in Income-tax Reference No. 40 of 1957.

2. The respondent-company is a limited liability company with a paid up capital of Rs. 15,25,000 as on June 30, 1947. Prior to 1930 the respondent-company had suffered large losses and in 1930 a debit balance of Rs. 12,75,000 in the profit and loss account of the respondent-company was adjusted by reducing the paid up capital. The face value of the Ordinary shares was reduced from Rs. 100 to Rs. 10 each and of Preference shares from Rs. 100 to Rs. 25 each after obtaining the sanction of the Bombay High Court. For the assessment year 1948-49 for which the relevant previous year was the year ended June 30, 1947, the respondent-company was assessed to a total income of Rs. 7,47,639. On that amount tax was calculated at Rs. 3,27,091, and the balance available of distribution by way of dividends for the purpose of S. 23A of the Income-tax Act. 1922 (hereinafter referred to as the Act ) was, therefore, Rs. 4,20,548. Section 23A of the Act requires a company in which the public are not substantially interested to declare in