DELHI FARMING & CONSTRUCTION(P) LTD. vs COMMNR. OF INCOME TAX, DELHI

The Supreme Court held that under Section 104 of the Income Tax Act, 1961, a company may be subjected to tax for failure to declare dividends if it does not meet the statutory requirements. The Court ruled that the appellant's decision not to distribute dividends was justified due to accumulated losses and minimal profits, thereby upholding the company's stance against the tax levy. The Court emphasized that the financial prudence of retaining earnings in light of past losses is a valid consideration in dividend distribution decisions.