2002 (8) TMI 55 - HC - Income Tax

The question referred to us at the instance of the assessee arises out of the order of the Tribunal, which allowed the appeal of the Revenue and restored the order of the Assessing Officer who had held that in computing the capital base for the purpose of surtax the credit balance in the profit and loss account is to be deducted, and that such balance cannot be treated as reserve. Whether, on the facts and circumstances of the case, the credit balance in the profit and loss account can be included on the part of the reserve for the purpose of rule 1 of the Second Schedule to the Companies (Profits) Surtax Act, 1964? - Having regard to the law enunciated by the Supreme Court in the case of Vazir Sultan Tobacco Co. Ltd. and in the case of National Rayon Corporation Ltd., the question which has been referred to us must be, and is, answered in favour of the Revenue and against the assessee.

Summary

The High Court of Madras ruled that the credit balance in the profit and loss account cannot be treated as a reserve for computing the capital base for surtax, based on Supreme Court decisions. The judgment favored the Revenue over the assessee.