1980 (4) TMI 199 - AT - Income Tax

Summary

Issues:
1. Treatment of reserve for bad and doubtful debts for capital computation.
2. Applicability of r.4 of the second Schedule in Companies (Profits) Sur-tax Act for deductions under Chapter VI-A of the IT Act.
3. Deductions of proposed dividends from general reserve for assessment to sur-tax.
4. Validity of reopening assessments under s. 8(b) of the Companies (Profits) Sur-tax Act.

Analysis:

1. The first issue pertains to the treatment of the reserve for bad and doubtful debts for capital computation. The Revenue contended that this reserve should not be considered for capital computation. However, the CIT (Appeals) upheld the assessee's claim based on the decision of the Bombay High Court in the case of Golden Tobacco Co. Ltd. The Tribunal noted that until the decision is reversed, they are bound by it, and thus, upheld the CIT (A)'s decision on this point.

2. The second issue concerns the applicability of r.4 of the second Schedule in Companies (Profits) Sur-tax Act for deductions under Chapter VI-A of the IT Act. The Tribunal found in favor of the assessee based on the decision of the Madras High Court in the case of Bimetal Bearings Ltd. The Revenue's objection that the decision is being appealed to the Supreme Court was dismissed, and the Tribunal upheld the CIT (A)'s decision on this issue.

3. The third issue involves the deduction of proposed dividends from the general reserve for assessment to sur-tax. Relying on decisions of the Madras High Court in cases such as Madras Motor & General Insurance Co. Ltd. and Indian Motor Parts Ltd., the Tribunal upheld the CIT (A)'s order, emphasizing that until these decisions are reversed, they must be followed.

4. The final issue addresses the validity of reopening assessments under s. 8(b) of the Companies (Profits) Sur-tax Act. The assessee claimed that the assessments for certain years were not validly reopened. The Tribunal analyzed the circumstances and concluded that the reopening was valid, especially in light of the decision of the Supreme Court in Indian and Eastern Newspaper Society. The Tribunal also considered the exclusion of the proportionate increase in paid-up capital from the computation of capital, ultimately upholding the CIT (A)'s decision based on the latest statement of law from the Bombay High Court.

In conclusion, the Tribunal dismissed the appeals and cross objections after thorough analysis and application of relevant legal precedents and decisions.