( 1 ) IN this reference under Section 66 (2) of the Indian I. T. Act, 1922, the court called for the following question:"whether, on the facts and in the circumstances of the case, any larger dividend than that declared by the assessee-company could reasonably be distributed within the meaning of Section 23a of the Indian Income-tax Act, 1922, and the application of Section 23a of the said Act was according to law?"

( 2 ) THE statement of the case relates to the assessment year 1961-62, the relevant accounting period being 1st July, 1959, to 30th June, 1960. The ITO observed that the profit and loss account showed a profit of Rs. 2,05,303. After adjusting income-tax to the extent of Rs. 2,353 the ITO worked out the commercial profit at Rs. 2,07,661. Deducting taxes @ 45% he arrived at a surplus of Rs. 1,14,214. The dividend declared was Rs. 70,000. Holding that the assessee was an investment company, the ITO found that 90% of the surplus should have been declared as dividend and thus there was a shortfall in the dividend declared. This was only 6%. The ITO was further of the view that the credit balance of Rs. 1. 03 lakhs carried forward in the profit and