DIPAK KUMAR SEN, J. ( 1 ) THE material facts in, and the proceedings leading up to, this reference are, inter alia, that Calcutta Investment Co. Ltd. , the assessee, was assessed to income-tax in the assessment year 1961-62, the relevant accounting year ending on December 31, 1960. In the said assessment year, the income of the assessee was derived from the following sources : (a) Benianship commission ( 2 ) THE assessee was assessed to income-tax on a total income of Rs. 11,17,685 and the tax which was found payable thereon was Rs. 5,02,958. In the said assessment year, the assessee had paid municipal tax aggregating to Rs. 11,738, 50% whereof being Rs. 5,869 was not allowed in the computation of the total income of the assessee. ( 3 ) ON the basis of the aforesaid, the Income-tax Officer found that the assessee had a distributable surplus of Rs. 6,08,858 for the purpose of distribution of dividends. The Income-tax Officer found further that the assessee was an investment company within the meaning of Section 23a of the Indian Income-tax Act, 1922, and as such was required to distribute 90% of its distributable surplus by way of dividends. ( 4 ) WITHIN 12 months after the expiry of the relevant previous year, the assessee declared a dividend of Rs. 2,75,000 which was found by the Income-tax Officer to be only 45% of the distributable surplus. ( 5 ) ON account of the aforesaid, the Income-tax Officer served a notice on the assessee to show cause why an order should not be passed under Section 23a (1) of the said Act of 1922. ( 6 ) WITHIN three months of the receipt of the show-cause notice, the assessee declared a further dividend of Rs. 9,900 on June 3, 1964, and contended that the dividends which the assessee had declared were as required under the relevant provisions of the said Act of 1922. It was contended by the assessee that its commercial profits as appearing from its accounts were only Rs. 6,18,526 and it had made provision for tax in its accounts of Rs. 3,10,000 and, therefore, the distributable surplus in the hands of the assessee was only Rs. 3,08,526, 90% whereof was Rs. 2,77,674. The assessee had declared dividends aggregating to Rs. 2,84,900 and, therefore, in excess of the statutory requirement. 6,18,526 and it had made provision for tax in its accounts of Rs. 3,10,000 and, therefore, the distributable surplus in the hands of the assessee was only Rs. 3,08,526, 90% whereof was Rs. 2,77,674. The assessee had declared dividends aggregating to Rs. 2,84,900 and, therefore, in excess of the statutory requirement. The Income-tax Officer did not accept the contention of the assessee. He held that even on the basis of the income returned, viz. , Rs. 6,51,130, less the tax payable thereon being Rs. 2,93,009, the distributable surplus in the hands of the assessee was Rs. 3,58,121, 90% whereof was Rs. 3,22,309, whereas the assessee had declared dividend within 12 months of only Rs. 2,75,000. The Income-tax Officer held further that on the basis of the total income of the assessee as assessed less the tax thereon and 50% of the municipal tax paid which was not allowed in the computation of the assessee's total income, the distributable surplus in the hands of the assessee was Rs. 6,08,858 and the dividend declared and distributed within 12 months was only Rs. 2,75,000 leaving a deficiency of Rs. 3,33,858. The Income-tax Officer levied penal super-tax at the rate of 50% on the said deficiency under Section 23a of the said Act of 1922 which was computed at Rs. 1,66,929. ( 7 ) BEING aggrieved, the assessee preferred an appeal to the Appellate Assistant Commissioner against the said order of the Income-tax Officer. It was contended on behalf of the assessee before the Appellate Assistant Commissioner that the Income-tax Officer was not justified in treating the assessee as an investment company for the purpose of Section 23a and further that having regard to its commercial profits, the assessee could not have distributed any more dividend than what it had done taking into account all business liabilities which the assessee had to meet as on December 31, 1960. In support of its contentions, the assessee relied and cited an order of the Tribunal passed in the case of the assessee for the assessment years 1957-58 to 1960-61, where it was held that though the assessee derived a major portion of its income from dividends, it also derived substantial income from other sources and it could not be said that the assessee's business in the said years consisted wholly or mainly of dealing in or holding of investments. The Appellate Assistant Commissioner noted that in the assessment year involved, the major portion of the income of the assessee, being Rs. 5,05,050, was earned by way of dividends and dealing in shares but the assessee had substantial income of Rs. 4,06,697 from other sources also. In the circumstances, it could not be said that the assessee's business during the relevant assessment year consisted wholly or mainly of dealing in or holding of investments and the assessee was not an investment company within the meaning of Section 23a of the said Act of 1922. As a non-investment company, it was held that the assessee was required to distribute 60% of its distributable surplus under the statute. ( 8 ) THE Appellate Assistant Commissioner next considered whether in view of the commercial profits earned by the assessee in the said assessment year, any further dividend could have been declared by it. The Appellate Assistant Commissioner found that the net profit earned by the assessee as per its profit and loss account was Rs. 6,18,526. To the said net profit, a sum of Rs. 1,45,815 on account of enhancement in the value of the closing stock of shares was added to bring the said profit of Rs. 7,64,541. From the said commercial profits, the tax payable was Rs. 3,08,470 which on deduction reduced the available funds in the hands of the assessee to Rs. 4,56,071. The Appellate Assistant Commissioner found further that in the said assessment year supplementary assessments in respect of earlier assessment years 1952-53 and 1954-55 were made and a further demand of Rs. 2,38,543 was raised and was outstanding as on December 31, 1960. The said demand had not been provided for in the accounts of the assessee in the earlier assessment years and had to be met out of the provision made in the account in the relevant assessment year. If the said demand on account of supplementary assessments was deducted from the available funds, the assessee would be left with only Rs. 2,17,428. The assessee having declared dividend to the extent of Rs. 2,75,000, it could not be said that such dividend was inadequate and, in any event, the assessee could not have declared dividends more than what it had done. 2,17,428. The assessee having declared dividend to the extent of Rs. 2,75,000, it could not be said that such dividend was inadequate and, in any event, the assessee could not have declared dividends more than what it had done. The Appellate Assistant Commissioner found that the Income-tax Officer was not justified in invoking Section 23a of the said Act of 1922 and levying additional super tax on the assessee in the said assessment year. He cancelled the said order passed by the Income-tax Officer under Section 2 3a. ( 9 ) BEING aggrieved, the Revenue preferred an appeal from the order of the Appellate Assistant Commissioner to the Income-tax Appellate Tribunal. On the facts, the Tribunal upheld the findings of the Appellate Assistant Commissioner that the business of the assessee did not consist wholly or mainly of dealing in or holding of investments. The Tribunal relied on and applied the decision of the Supreme Court in the case of CIT v. Distributors (Baroda) Pvt. Ltd. [1972] 83 ITR 377. ( 10 ) ON the question of deficiency of the dividends declared by the assessee out of its commercial profits, it was contended on behalf of the Revenue before the Tribunal that if additional tax demands for the earlier assessment years 1952-53 and 1954-55 were taken into account, the additional income which also would be available to the assessee should have been considered for distribution of dividends. The Tribunal noted that the additional demands in respect of the earlier assessment years came to be made as a result of revaluation of stock held by the assessee. Such revaluation was made from year to year and ultimately in the calendar year 1960, which was the relevant accounting year, there was an enhancement of Rs. 1,45,915. The said enhancement was duly taken into consideration by the Appellate Assistant Commissioner in computing the available funds in the hands of the assessee. The Tribunal held that no extra funds were available to the assessee, though there was a tax demand in respect of the earlier assessment years consequent on the revaluation of stock for the said years. It was not the case of the Revenue that the enhancement was made on account of suppressed stock which might have been sold without the proceeds being brought into account of the assessee. It was not the case of the Revenue that the enhancement was made on account of suppressed stock which might have been sold without the proceeds being brought into account of the assessee. The Tribunal held that in the facts the assessee could not have declared a dividend larger than what was declared. The appeal of the Revenue was dismissed. ( 11 ) ON an application of the Revenue under Section 66 (2) of the Indian Income-tax Act, 1922, the following questions have been directed to be referred by the Tribunal as questions of law arising out of its order for the opinion of this court:"1. Whether, on the facts and in the circumstances of the case, the Tribunal is right in holding that the assessee-company is not a company whose business consists wholly or mainly in the dealing in or holding of investments within the meaning of Explanation 2 (i) to Section 23a of the Indian Income-tax Act, 1922 ? 2. Whether, on the facts and in the circumstances of the case, the Tribunal is right in holding that it would not be reasonable for the company to have paid a larger dividend than that declared by it ?" ( 12 ) AT the hearing, learned advocate for the Revenue submitted that the Tribunal erred in holding that the business of the assessee did not consist wholly or mainly in the dealing in or holding of investments. It was submitted that apart from dividends and income from shareholding, the other items of income of the assessee were on account of interest on loans, other than interest and rent. If the said income was taken to be income from investments, as it ought to have been done, then it should have been held that the assessee was an investment company within the meaning of Section 23a of the said Act of 1922. In support of his contentions, learned advocate for the Revenue cited the following decisions : (a) CIT v. Distributors (Baroda) P. Ltd. This decision of the Supreme Court was cited for the proposition that a business of "holding of investments" referred to a real, substantial or systematic or organised course of activity of investment carried on by the assessee with, inter alia, the object of earning profits. (b) Nawn Estates. (P) Ltd. v. CIT. (b) Nawn Estates. (P) Ltd. v. CIT. In this case, the assessee was incorporated with the objects, inter, alia, of purchasing lands and buildings and letting them out. During the relevant assessment years, the assessee had invested moneys in house property and its major income in the said assessment years was derived from the said properties. It was held by the Supreme Court on the above facts that the assessee was "a company whose business consisted wholly or mainly in the holding of investments" within the meaning of Section 23a of the Indian Income-tax Act, 1922. The Supreme Court further observed that in the context of Section 23a, the term "investment" was not a term of art and should be interpreted in accordance with its popular meaning and not as a technical term. (c) CIT v. Coochbehar Trading Co. Pvt. Ltd. This is a judgment of a Division Bench of this court to which I was a party. In this case, the assessee was found to be carrying on a systematic and organised activity of earning profits from investments made in shares of other companies and also by deposit of its surplus funds with its allied concerns which earned interest. It was held that the activity of earning interest through deposits of the surplus funds of the assessee was an investment in the ordinary or popular sense of the term and came within the mischief of Section 23a of the Indian Income-tax Act, 1922. Apart from the said two activities, the assessee had no other business and it was held to be a company whose business consisted wholly or mainly in the dealing in or holding of investments within the meaning of the said Section 23a. (d) CIT v. Mother India Fire and General Insurance Co. Ltd. This decision of a Division Bench of the Madras High Court was cited for the proposition that the word "investment" had to be understood in its ordinary and popular sense or in the commercial sense as the said word had not been comprehensively denned under the Income-tax Act, 1961. According to the dictionary, it was held that if money was advanced to some other persons with the object of securing any income or profit, the same would be an investment. It was held that a fixed deposit in a company was property and would be an investment. According to the dictionary, it was held that if money was advanced to some other persons with the object of securing any income or profit, the same would be an investment. It was held that a fixed deposit in a company was property and would be an investment. ( 13 ) LEARNED advocate for the Revenue did not effectively address us on the other question, namely, whether the assessee could have paid a larger dividend than that declared by it in view of the funds available in its hands. ( 14 ) LEARNED advocate for the assessee, on the other hand, submitted that even if it was held that the assessee was an investment company, it could not have declared a higher dividend than it did in view of the available funds in its hands. It was submitted that it has been found as a fact that the net profit of the assessee in the relevant assessment year as per its profit and loss account was Rs. 6,18,526. If the same was enhanced by a further sum of Rs. 1,45,815 on account of revaluation of its stock at the end of the year, the total of such profit would amount to Rs. 7,64,541. If the tax payable assessed at Rs. 3,08,470 was deducted from such net profits, the balance remaining in the hands of the assessee would be Rs. 4,56,071. From such balance, the additional tax imposed in the year in respect of earlier assessment years being Rs. 2,38,543 had to be deducted and the ultimate balance left in the hands of the assessee would be Rs. 2,17,528. The assessee had declared a dividend of Rs. 2,75,000, that is, more than 100% of the available funds in his hands and, therefore, Section 23a was not attracted in the facts of the instant case. ( 15 ) LEARNED advocate for the assessee submitted that the figures on the basis of which the above computation had been made had not been challenged by the Revenue and the finding in respect thereof had become final. It was submitted that if such computation was accepted, then the question whether the assessee was an investment company or not would be academic and this reference should be answered on the basis of question No. 2 in favour of the assessee. ( 16 ) THE contentions raised on behalf of the assessee are not without substance. It was submitted that if such computation was accepted, then the question whether the assessee was an investment company or not would be academic and this reference should be answered on the basis of question No. 2 in favour of the assessee. ( 16 ) THE contentions raised on behalf of the assessee are not without substance. The Supreme Court laid down in CIT v. Gangadhar Banerjee and Co. (P.) Ltd. [1965] 57 ITR 176, that whether payment of a dividend or a larger dividend than that declared by a company would be unreasonable within the meaning of Section 23a of the Indian Income-tax Act, 1922, is a matter to be decided from the point of view of the company and its directors. The reasonableness or unreasonableness of the amount distributed as dividends has to be judged on business considerations including previous loans, present profits, availability of surplus money and reasonable requirements in future. An overall picture of the financial position of the business had to be taken and the Income-tax Officer had to consider the quantum of dividend required to be declared from the point of view of a prudent businessman. ( 17 ) WE have no reason to brush aside the contention of the assessee that in the relevant assessment year, the available surplus in its hands for the purpose of distribution of dividends was Rs. 2,17,528 and that it had declared dividends more than the said amount. ( 18 ) FOR the reasons as above, we answer question No. 2 in the affirmative and in favour of the assessee. In view of our answer to question No. 2, question No. 1 does not call for any answer. The reference is disposed of accordingly. There will be no order as to costs. .