THE COMMISSIONER OF INCOME-TAX,BOMBAY CITY, BOMBAY vs BIPINCHANDRA MAGANLAL AND CO. LTD.,BOMBAY

The Supreme Court upheld the High Court's decision that the sum of Rs. 15,608 should not be included in the assessable income of the company for determining the reasonableness of dividend payments under Section 23A of the Indian Income Tax Act, 1922. The Court clarified that 'smallness of profit' must be assessed based on commercial principles and not merely on assessable income, as per Section 10(2)(VII) second proviso. The judgment emphasized that what is not commercial profit cannot be considered for dividend distribution assessments.