9911796707
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Issues:
1. Inclusion of amount in reserve for bad and doubtful debts in capital computation for surtax liability. 2. Treatment of a sum as 'provision' instead of 'reserve' for computing capital base. Analysis: Issue 1: The case involved questions regarding the inclusion of amounts in the reserve for bad and doubtful debts in the capital computation for surtax liability for the assessment years 1969-70 and 1970-71. The Income-tax Officer and Commissioner of Income-tax (Appeals) contended that the amounts were provisions against estimated bad debts and not free reserves, hence not includible in the capital base. The Tribunal upheld this view, emphasizing the lack of evidence to support the claim that the amounts were free reserves. The High Court concurred, stating that the amounts indeed represented estimated bad debts and were rightly treated as "provision" and not "reserve." Therefore, the Tribunal's decision to exclude the amounts from the capital computation was justified, ruling in favor of the Revenue and against the assessee. Issue 2: Regarding the treatment of a sum as 'provision' instead of 'reserve' for the purpose of computing the capital base, the court noted that the original provision was made against specific liabilities for expenses and continued to be shown as such in the relevant year. Despite the claim of an excess provision for other expenses, all lower authorities affirmed that the provision was against specific liabilities that persisted. As this factual finding was undisputed, the court upheld the Tribunal's decision that the sum should be correctly treated as "provision" and not "reserve." Consequently, the court answered question No. 2 in the affirmative, in favor of the Revenue and against the assessee. The reference was disposed of with no order as to costs.
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