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Assessment of surtax on a disputed amount claimed as a dividend reserve by the assessee. Analysis: The judgment pertains to the assessment of Standard Pharmaceuticals Ltd. for surtax under the C. (P.) S.T. Act, 1964, concerning an amount of Rs. 2,97,277 claimed by the assessee as a dividend reserve. The Income Tax Officer (ITO) initially determined the amount as a surplus in the profit and loss account, not a reserve. The assessee appealed, but the Appellate Assistant Commissioner (AAC) also rejected the claim, stating it was a provision for anticipated liabilities related to dividend declarations. The Income-tax Appellate Tribunal, however, found that the amount was indeed a reserve created for future dividend declarations, which should be included in the computation of the company's capital. The Tribunal referred a question of law to the High Court, questioning whether the said amount credited to the 'dividend reserve' account qualified as a 'reserve' under the relevant rule. The revenue attempted to introduce new information regarding the movement of funds in the account, showing that the amount had been paid as dividends in the preceding year. However, the Tribunal did not allow this new information to be included, as it had not been considered by the lower authorities. During the hearing, the revenue argued that the disputed amount was not a reserve but a provision for a contingent liability, as the dividend had been declared and paid in the same accounting year. Citing precedents, the revenue contended that proposed dividends should not be considered reserves for assessment purposes. In contrast, the assessee relied on a Supreme Court decision emphasizing that the High Court should not consider documents not included in the case statement or discussed in prior orders. The Tribunal's factual finding that the amount was segregated as a reserve was crucial, distinguishing it from precedents where undistributed profits were not segregated. The Tribunal rejected the revenue's attempt to introduce new evidence from the balance-sheet, leading the High Court to decline further inquiry. Ultimately, the High Court ruled in favor of the assessee, affirming that the disputed amount should be treated as a reserve for surtax assessment purposes.
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