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Issues:
1. Whether provision for taxation and proposed dividends should be included in the computation of capital under the Super Profits Tax Act, 1963. Analysis: The judgment by the High Court of Allahabad dealt with the question of whether the provision for taxation and proposed dividends should be considered as part of the capital for computing under the Super Profits Tax Act, 1963. The assessee claimed that these amounts should be treated as reserves, while the Super Profits Tax Officer disagreed, stating that they were intended to meet contingent liabilities and should not be classified as reserves. The Tribunal relied on a decision of the court in a similar case and allowed the appeal, directing that the amounts be treated as reserves. However, the High Court emphasized that the determination hinges on whether the liability had actually arisen and the fund was created for its discharge, or if the sums were earmarked for a future liability. The court highlighted the need for findings on crucial aspects such as the extent to which the provision for taxation exceeded the accrued tax liability and how the assessee decided on payable dividends for the year. Without these findings, the question of law could not be properly decided. The High Court ultimately sent the reference back to the Tribunal for rehearing, instructing to decide the matter afresh after recording appropriate findings on various questions, including factual inquiries. The court refrained from making any orders regarding costs in the case. The judgment underscored the importance of examining all relevant materials to determine the nature of the provision for taxation and proposed dividends, emphasizing the distinction between reserves and earmarked amounts for future liabilities.
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