1999 (9) TMI 61 - HC - Income Tax

Summary

Issues:
1. Interpretation of Circular No.53 issued by the Central Board of Direct Taxes.
2. Inclusion of excess development rebate reserve in the computation of capital under the Companies (Profits) Surtax Act, 1964.

Analysis:
The judgment by the High Court of KERALA involved multiple Income-tax Reference Nos. concerning the interpretation of Circular No.53 issued by the Central Board of Direct Taxes. The primary question revolved around the applicability of the circular to reassessments for specific assessment years, even if made after the circular's issuance date. The Tribunal initially declined to refer the second question sought by the assessee, leading to further compelling references filed before the court. Subsequently, the court deliberated on the inclusion of the excess development rebate reserve in the computation of capital under the Companies (Profits) Surtax Act, 1964.

The High Court, through a common judgment, ruled in favor of the Revenue and against the assessee regarding the interpretation of Circular No.53. Another question arose in a separate Income-tax Reference, which was also answered in favor of the Revenue by the court. A subsequent petition to rectify an apparent error in the judgment was dismissed on the grounds that the court had completed its function upon answering the reference questions. The assessee was advised to pursue the remedy of filing an appeal.

The matter was further escalated to the Supreme Court through Civil Appeals, which eventually allowed the appeals and remitted the case back to the High Court for reconsideration, specifically focusing on the question related to the excess development rebate reserve under the Companies (Profits) Surtax Act, 1964. The Supreme Court emphasized that the High Court had not considered this question on its merits, necessitating a fresh review.

Upon reconsideration, the High Court reaffirmed its previous decisions in line with two prior Bench decisions favoring the Revenue over the assessee. The court found no compelling reason to deviate from its earlier stance, especially considering the absence of a direct conflict with the Supreme Court's decision in Vazir Sultan Tobacco Co. Ltd. v. CIT. Consequently, the High Court answered the remitted question in the affirmative, supporting the Revenue and rejecting the assessee's claims. The court clarified that the remitted question was the only one under consideration, while previous decisions in the Income-tax References were upheld based on the Supreme Court's directive. The judgment was to be forwarded to the Income-tax Appellate Tribunal for further action.