( 1 ) THIS is a reference under Section 66 (1), Income-tax Act, made by the Income-tax Appellate Tribunal, Madras Bench, to this Court in respect of an assessment of the applicant company for the assessment years 1939-40 and 1940-41. The question which has been submitted to the Court for answer is as follows : "whether in the facts and circumstances of this case, the provisions of Section 23a were properly invoked ?"

( 2 ) THE assessee is a private limited company whose main source of income is income from property assessable under Section 9, Income-tax Act. Its only other source of income is interest on deposits, but such income is only slightly over 1 per cent, of the assessable income.

( 3 ) THE relevant accounting years for the two assessments were the calendar years 1938 and 1939. According to the assessee the company made a profit of Rs. 30,000 in 1938 and Rs. 15,000 in 1939 and the whole of the profit for these two years was distributed amongst the share-holders as dividends.

( 4 ) THE assessable income of this company was assessed by the taxing authorities at Rupees 1,26,581 for the year 1939-40 and at Rs. 1,24,787 for the year 1940-41. These figures inclu