Punjab & Haryana H.C : Whether, on the facts and in the circumstances of the case, the Tribunal was right in upholding the order of the CIT(A) to the effect that the amount of Rs. 57,85,000 is in the nature of general reserve and is not hit by the exceptions contained in the Explanation to r. 1 of the Second Schedule?

High Court Of Punjab & Haryana

CIT vs. Hansa Agencies (P) Ltd.

Section 256(2)

G.S. Singhvi & K.S. Kumaran, JJ.

ITC No. 75 of 1993

24th November, 2000

Counsel Appeared

R.P. Sawhney, Rajesh Bindal, for the Revenue : None, for the Assessee

JUDGMENT

G.S. SINGHVI, J. :

This is a petition under s. 256(2) of the IT Act, 1961 (for short “the Act”), directing the Tribunal, Amritsar Bench, Amritsar (for short “the Tribunal”), to refer the following question of law to this Court for its opinion : “Whether, on the facts and in the circumstances of the case, the Tribunal was right in upholding the order of the CIT(A) to the effect that the amount of Rs. 57,85,000 is in the nature of general reserve and is not hit by the exceptions contained in the Explanation to r. 1 of the Second Schedule?” A perusal of the record shows that the assessee had filed a return declaring chargeable profits as nil. The IAC (Assessment), Range-I, Jalandhar, issued notice to the assessee under the Surtax Act and after considering the submissions made by its representative, he passed the order dt. 29th Jan., 1988, declaring the general reserve as exclusive surplus in the P&L a/c and not the capital gain for the purpose of statutory deductions and declined the deductions claimed by the assessee. The CIT(A)-II, Jalandhar [for short “the CIT(A)”], allowed the appeal filed by the assessee and directed the assessing authority to amend the surtax assessment by treating Rs. 57,85,000 as part of the capital. The Tribunal upheld the order passed by the CIT(A) and the reference application filed by the Revenue was also dismissed.

Shri R.P. Sawhney invited our attention to the order passed by the Tribunal and submitted that the decision of the Supreme Court in CIT vs. Elgin Mills Ltd. (1986) 58 CTR (SC) 188 : (1986) 161 ITR 733 (SC), which has been relied upon by the Tribunal for declining reference application filed under s. 256(1) of the Act did not deal with the issue as to whether the amount is in the nature of general reserve and could be treated as part of the P&L a/c and is not hit by the exceptions contained in the Explanation to r. 1 of the Second Schedule.

After considering the submission of Shri Sawhney and having gone through the decision of the Supreme Court, we are convinced that the question sought by the Revenue deserves to be determined by this Court. Hence, the petition is allowed. The Tribunal is directed to refer the above noted question and send the statement of case along with the records to this Court.

[Citation : 255 ITR 559]

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