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TMI Blog1978 (1) TMI 106X X X X Extracts X X X X X X X X Extracts X X X X ..... eal is only to keep the matter alive as the order of the AAC in the income-tax proceedings has gone to the Tribunal in appeal. 3. It is now pointed out that the Tribunal has also disposed of the appeal in the income-tax proceedings in ITA, No. 554 of 76-77 dt. 11th Aug., 1977 (to which one of us was a party) and confirmed the order of the AAC. In the light of the said decision, it is clear that the modified total income in the income tax proceedings, as finally confirmed by the Tribunal, will have to be adopted here also for surtax purposes. In the result the departmental appeal for the asst. yr. 1970-71 is dismissed. 4. For the asst. yrs. 1972-73 and 1973-74 the first common point is about the inclusion of the sums of Rs. 21,58,590 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an Smelting and Refining Co. held that the exclusion of the dividend declared out the general reserve was not warranted and directed the ITO to modify the computation of capital base accordingly. 5. We have also been following the said decision of the Bombay High Court and have been holding that if certain dividends are declared by the general Body after the closing of the accounting year out of the general reserve, such dividends do not lose the character of reserves and dividends so declared would become a debt only on the date of declaration. Till then any recommendation of the Board of Directors would be only a mere proposal. In the light of the Bombay High Court decision referred to above and relied on by the AAC, the AAC had rightly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oodwill reserve account was Rs. 37,500. The assessee's claim was that this should also be taken for purposes of calculation of capital but the ITO had not accepted the claim. On appeal, the AAC by applying the test laid down by the Karala High Court in CIT vs. Periakaranalai Tea and Produce Co Ltd(4). that provision meant setting apart of a sum for a known liability whereas 'reserve' meant setting apart of a sum for general or specific purpose where no liability existed on the last day of the accounting year, held that the amounts shown as goodwill reserve should be treated as 'reserve' and will form a part of capital for purpose of surtax. 9. We are of the view that the AAC had rightly treated this as a reserve because there is no liabil ..... X X X X Extracts X X X X X X X X Extracts X X X X
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