HON’BLE SUPREME COURT · SOURCE-REVIEWED NOTE
Commissioner of Income-tax (Central), Calcutta v. Asiatic Textile Ltd.
Civil Appeal Nos. 1687-1688 of 1968
[1972] 1 SCR 81 ·
Income-tax Act, 1922: section 23A(1)
Sources & disclosures includedDownload original judgment / order
Two-judge bench; judgment delivered by K. S. Hegde, J. · K. S. Hegde, J. · A. N. Grover, J.
Assessment years: 1955-56, 1956-57
01 · Facts of the case
The assessee had assessable profits but did not declare dividends for two years because its shareholding in Elphinstone Mills had fallen by about Rs.12 lakh. The officer imposed additional super-tax on the undistributed surplus, while the appellate authorities and High Court accepted the directors' business judgment (SCR pp.81-84; PDF pp.1-4).
02 · Discussion by the Hon’ble Court
Section 23A prevented tax avoidance but did not make the officer a super-director. Reasonableness had to be judged from a prudent businessman's perspective using the company's overall financial position. A real capital loss was relevant even though the shares were still held and might later recover (SCR pp.84-87; PDF pp.4-7).
03 · Judicial decision
The Court upheld the view that non-declaration was reasonable and dismissed Revenue's appeals with costs.
Source: Primary judgment: decision
04 · Outcome / in whose favour
In favour of the assessee-company under the historical section 23A regime.
Source: Primary judgment: outcome
05 · AKHB REVIEW POINT
AKHB analysis: where a tax rule reviews directors' distribution judgment, preserve contemporaneous evidence of capital impairment, liquidity, reserves and future needs. The Court's prudent-businessman approach is historically important, but the former section 23A mechanism should not be presented as current law.
Source & verification
Download original judgment / order · Open cited source rendition
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Statutory scope
The decision applies repealed section 23A of the 1922 Act. It is retained as historical guidance on the prudent-businessman standard.
Later treatment
Source checked 2026-10-12. No present-law equivalence or comprehensive later-treatment check is represented.
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