9911796707
TMI Blog1989 (2) TMI 142X X X X Extracts X X X X X X X X Extracts X X X X ..... al submissions. However, before we come to deal with the rival submissions, we record the factual backdrop of the case on the basis of which the Commissioner made the impugned order. 2. The assessee is a private limited company. For the year under appeal and for some of the earlier assessment years, the assessee had been taxed under the Companies (Profits) Surtax Act, 1964. For the assessment year 1983-84 as the previous year of the assessee ended on 30th June, 1982, return under this Act was filed on 28-10-1983 declaring chargeable profits of Rs. 6,23,358. The Surtax Officer, who, in this case, was IAC (Assessment) Range-III, New Delhi issued statutory notices to the assessee and after discussion proceeded to determine net chargeable profits. The Surtax Officer has recorded in the impugned order made u/s. 6(2) on 2-2-1985 that the finally assessed income after giving appeal effect to the appellate orders for the asst. year 1983-84 for purpose of income-tax came to Rs. 36,05,010. Thereafter, he computed the chargeable profits. Taking into consideration, the total income of Rs. 36,05,010 the Surtax Officer deducted income-tax payable thereon to arrive at the net income of Rs. 13,87 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uting the net chargeable profits, the IAC erroneously worked out statutory deduction by including in the capital employed, the balance lying in the profit and loss account amounting to Rs. 23,05,998. The wrong computation of statutory deduction has resulted in undercharge of Surtax by Rs. 1,55,653. The correct statutory deduction allowable is worked out as under : Share capital : Rs. 5,00,000 Development Rebate Reserve : Rs. 1,12,206 Investment Allowance Reserve Rs. 12,83,164 General Reserve : Rs. 5,00,000 ----------------------- Total : Rs. 23,95,370 ----------------------- Statutory deduction @ 15 % of the capital as worked out above. Rs. 3,39,306 instead of Rs. 7,05,205 wrongly allowed at the time of assessment. From the above facts, it is clear that the order passed by the IAC (Asst.) is erroneous and prejudicial to the interest of revenue." 4. The assessee responded to this notice with a reply that a sum of Rs. 23,05,998 which was appearing on the first date of the accounting year under the caption, "Profit & Loss Appropriation Account" was in fact and in substance part and parcel of the reserves and surpluses. It had, therefore, rightly been considered as reserve fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year in balance sheet under the head Profit & Loss Appropriation Account. This reference to the Directors' Report was to the Report Dated 3rd December, 1982. 6. Having so noted, the relevant material in his impugned order, the ld. Commissioner observed that the above facts clearly show that the amount though shown under the head "Reserves & Surpluses" had continued to be unappropriated balance of Profit & Loss Appropriation Account and there was no resolution either by the Board of Directors of the Company or any other confirmation by the body of the shareholders that this amount should be treated as general reserve in the balance-sheet. To such facts of the case, according to the ld. Commissioner, the judgment of the Madras High Court in the case of CIT v. Vasantha Mills Ltd. [1957] 32 ITR 237 was applicable. According to him, legal position, in this regard, had been settled by a judgment of the Supreme Court in the case of CIT v. Mysore Electrical Industries Ltd. [1971] 80 ITR 566. He also pointed out to a number of judgments of the High Courts in which the above judgment of the Hon'ble Supreme Court was followed. The learned Commissioner, thereafter, observed that in view of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pecifically brought to our notice the judgment of the Hon'ble Calcutta High Court, which, according to him, applied squarely to the facts of the case of the assessee and the Commissioner had, in fact, accepted that it applied but opted not to follow it. His order, therefore, cannot be said to be an order in accordance with law. It may be set aside and in its place that of the Surtax Officer restored. On the other hand, the revenue relied upon the order made by the ld. Commissioner and wholly supported it with reference to the authorities cited therein. It was submitted that the order of the STO as pointed out by the ld. Commissioner was erroneous as well as prejudicial to the interests of revenue and, therefore, the Commissioner rightly assumed jurisdiction u/s 16 of the Act. 9. We have carefully considered the submissions of the rival parties, the facts of the case and the relevant provisions of law. We find that the surtax assessment for the year under appeal was made by the IAC (Asst.) Range-III, New Delhi on 2-2-1985. We have to proceed on the assumption that while deciding the various issues for the purpose of assessment, the ld. Assessing Officer was aware of not only the st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of the Supreme Court in the case of Vazir Sultan Tobacco Co. Ltd. but preferred to rely upon an earlier judgment in the case of Mysore Electrical Industries Ltd. not appreciating that the earlier judgment of the Supreme Court had been considered in the subsequent judgment in the case of Vazir Sultan Tobacco Co. Ltd. Therefore, even taking into consideration the relevant provisions of law, it cannot be said that there was a mistake, a legal mistake, in the order of the Surtax Officer making it erreneous as well as prejudicial to the interests of revenue. 11. Now, we find that the said amount of Rs. 23,05,998 was appearing in the Profit & Loss Appropriation Account for the year ending 1981. First of July, 1981 is the first day of the accounting period relevant to the assessment year 1983-84 because the previous year for this assessment year ended on 1982. In the balance sheet of the company for the year ending on 30th June, 1981 from the Profit & Loss Appropriation Account, the sum of Rs. 23,05,998 was taken to Schedule II under the caption "Reserves and Surplus" and was shown under the caption "Profit & Loss Appropriation Account." This amount, therefore, as such was available ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
