Bombay H.C : Whether, on the facts and in the circumstances of the case, the dividend reserve of Rs. 3,50,000 as on 1st Jan., 1966, is includible as ‘reserve’ in the computation of capital of the assessee-company for the asst. yr. 1967-68 in terms of r. 1 of the Second Schedule to the Companies (Profits) Surtax Act, 1964 ?

High Court Of Bombay

New Great Insurance Co. Of India Ltd. vs. CIT

Section SURTAX SCH. II, SURTAX RULE 1

Asst. Year 1967-68

S. P. Bharucha & T. D. Sugla, JJ.

IT Ref. No. 414 of 1976

7th September, 1989

Counsel Appeared

Dr. V. Balasubramanian & K. C. Sidhwa, for the Revenue : S. J. Mehta & I. M. Munim, for the Assessee

S. P. BHARUCHA, J. :

This reference raises two questions. The first question is at the instance of the assessee and the second is at the instance of the Revenue. The questions read thus :

“(1) Whether, on the facts and in the circumstances of the case, the dividend reserve of Rs. 3,50,000 as on 1st Jan., 1966, is includible as ‘reserve’ in the computation of capital of the assessee-company for the asst. yr. 1967-68 in terms of r. 1 of the Second Schedule to the Companies (Profits) Surtax Act, 1964 ?

(2) Whether, on the facts and in the circumstances of the case, the gratuity reserve of Rs. 4,00,000 as on 1st Jan., 1966, is includible as ‘reserve’ in the computation of capital of the assessee-company for the asst. yr. 1967-68 in terms of r. 1 of the Second Schedule to the Companies (Profits) Surtax Act, 1964 ?”

Counsel are agreed that the first question must be answered in the negative and in favour of the Revenue in view of the judgment of the Supreme Court in Vazir Sultan Tobacco Co. Ltd. vs. CIT (1981) 25 CTR (SC) 186 : (1981) 132 ITR 559 (SC). The first question is, accordingly, so answered.

It is also agreed that the second question must be answered in the negative and in favour of the Revenue in view of the same Supreme Court judgment. The question is, accordingly, so answered. When the matter goes back to the Tribunal, the Tribunal shall determine whether the appropriation of Rs. 4 lakhs towards gratuity reserve is in excess of the liability of the assessee on account of gratuity determined on actuarial calculation. If there is such excess, the amount thereof shall be deemed to be a reserve and includible in the computation of the capital of the assessee-company under r. 1 of the Second Schedule to the Companies (Profits) Surtax Act, 1964.

No order as to costs.

[Citation :183 ITR 40]

Malcare WordPress Security