Judgment :- 1. The Income-tax Appellate Tribunal, Cochin Bench has referred the following question to this Court under S.256 (1) of the Income-tax Act. "Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that for the assessment year 1973-74, a larger dividend could have been declared and therefore, the provisions of S.104 of the Income-tax Act, 1961 were applicable and the levy of additional tax under the aforesaid provisions was in order"? The Assessee is an investment company. The assessment relates to the year 1973-74. As per Annexure Al order of the Income-tax Officer, the assessee was held liable for an additional tax of Rs. 22,580.00 due under S.104 of the Income-tax Act. The assessee-company had during the accounting period credited a sum of Rs. 1,13,193.00 as capital gains received in its Profit and Loss Account. The Company bad declared a dividend of Rs. 25,000/-for distribution among its shareholders. The Income-tax Officer found that the "distributable income" within the meaning of clause (1) of S.109 of the Act is Rs. 70,161.00 and being an investment Company the assessee is liable to pay 50 percent of the difference between the distributable income and the dividend actually paid as additional tax under S.104 of the Act. 2. In appeal at the instance of the assessee, the Appellate Assistant Commissioner took the view that the capital gains received do not form part of the commercial profits of the assessee-company and cannot therefore be taken into account in arriving at its distributable income for the purpose of levy of additional tax under S.104 of the Act. On further appeal by the Revenue the Tribunal held that the capital gains received during the accounting period form part of the distributable income of the Company and it was liable to additional tax as an investment Company under S.104 of the Act. 3. The only question urged by the learned Counsel for the assessee is that capital gains received during the previous year on sale of immovable property cannot be taken into account in reckoning the "distributable income" of the assessee-company. S.109 (i) of the Act defines "distributable income" to mean the gross total income of a company as reduced by the various items mentioned in sub-clauses (a) to (h). S.109 (i) of the Act defines "distributable income" to mean the gross total income of a company as reduced by the various items mentioned in sub-clauses (a) to (h). Sub-clause (d) relates to "losses under the head" "capital gains relating to capital assets other than short term capital assets". If such losses as are referred to in clause (d) are deductible from the gross income, there cannot be any doubt that the capital gains received form part of the gross total income of the Company within the meaning of S.109 of the Act. S.104 mandates the Income-tax Officer to make an order in writing that the Company shall be liable to pay the additional tax as provided under S.104, quite apart from the Income-tax payable on the basis of assessment under S.143 or S.144 of the Act. 4. In Gobald Motor Service (P) Ltd. v. Commissioner of Income-tax, Madras (60 I. T. R.417), the Supreme Court considering the liability for distribution of dividend under S.23A of the Income-tax Act, 1922 stated at page 421: "The second contention of the learned counsel for the assessee was that on the findings the Income-tax Officer was not entitled to distribute more than Rs. 60,000 because the assessee was now being made to distribute much more than the commercial profits. This may be so; but once the Income-tax Officer is satisfied that in respect of any previous year the profits and gains distributed as dividend by any Company are less than 60 percent of the assessable income of the previous year, as reduced by the amount of income-tax and supertax payable by the assessee in respect thereof, and that it would not be unreasonable to distribute a larger dividend than that declared,he has no option but to pass an order that the undistributed portion of the assessable income of the assessee of the previous year, as computed for income-tax purposes and reduced by the amount of income-tax and super-tax payable by the company, shall be.deemed to have been distributed as dividend amongst the shareholders". 5. For the aforesaid reasons we answer the question referred, in the affirmative i.e. in favour of the Revenue and against the assessee. There will be no order as to costs. A copy of this judgment under the seal of the Court and the signature of the Registrar, will be forwarded to the Income-tax Appellate Tribunal, Cochin Bench.