( 1 ) THIS is a reference under Section 66 (2) of the Indian Income-tax Act, 1922, and the question of law is as follows :"whether, on the facts and in the circumstances of the case, the amount of dividends declared in favour of the assessee was rightly taken into consideration by the Income-tax Officer before passing order against the assessee under Section 23a of the Indian Income-tax Act, 1922, as it stood at the material time ?"

( 2 ) THE assessee is an investment company. The assessee makes lip its accounts as on 31st December each year. In this reference we are concerned with the assessment year 1956-57 and the relevant previous year ends on December 31, 1956.

( 3 ) THE assessee submitted its return of _ income after making certain adjustments to the profit shown in the profit and loss account. The adjusted income came to Rs. 2,05,840 and was returned for assessment. The assessee was assessed on an income of Rs. 2,36,700, the difference being mainly due to the dividend being grossed up under the law then in force.

( 4 ) INCLUDED in the income is a sum of Rs. 2,75,640 which was the dividend declared in favour of the assessee on December 28, 1956. The general meeting