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Issues:
1. Whether the sum standing to the credit of 'general reserve' was required to be reduced by the dividend declared in computing the capital of the assessee-company for surtax. 2. Whether the amount contributed by Siemens Asia Investments was part of the paid-up capital of the assessee. 3. Whether the amount standing to the credit of the capital suspense account was includible in computing the capital of the assessee for surtax as 'paid-up capital' or as a reserve. Analysis: The High Court of Bombay addressed a reference under the Income-tax Act and the Companies (Profits) Surtax Act regarding three questions of law raised by the assessee. The first question was answered affirmatively against the assessee based on a Supreme Court decision. The remaining two questions focused on the treatment of amounts contributed by Siemens Asia Investments and the inclusion of amounts in the capital suspense account for surtax computation. The court detailed the history of loans and proposed share capital increase by Siemens Asia Investments in the assessee-company. The assessee argued that the amounts should be considered as paid-up share capital or reserves. However, the court held that the amounts did not qualify as paid-up share capital before the allotment of shares to Siemens Asia Investments. The court also rejected the argument that the amounts could be treated as a reserve, citing a Supreme Court interpretation that reserves must be understood in a business context. The court concluded that the amounts only became part of the paid-up share capital upon the allotment of shares, supporting the decisions of the Appellate Assistant Commissioner. Consequently, both questions were answered in the negative against the assessee and in favor of the Revenue. No order as to costs was made in the case.
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