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TMI Blog1992 (12) TMI 108X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee which is directed against the order of the CIT(A), Belgaum dt. 16-9-1988 wherein, inter alia, he has observed that provision for taxation was found to be excess and therefore, it was written back. Consequently he held that such excess provision did not go to increase the reserve so as to form capital of the company. Therefore, he has rejected the claim of the assessee for including the ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 132 ITR 559 and upheld the order of the Assessing Officer on the view that the Supreme Court has held that the provision reasonably necessary should be treated as reserve and in the case of the assessee, the provision made was excessive and therefore, it is written back and consequently could not form part of reserve. 4. At the time of hearing, the learned counsel for the assessee as well as th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s year relevant for the assessment year. This is a general proposition. The Supreme Court in the case of Vazir Sultan Tobacco Co. Ltd. had laid down that though the amount set apart by the Board of Directors of a company for liability to taxation in respect of the profits which it has earned during the year will have to be regarded as a provision for a known and existing liability, the quantificat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es or the amounts credited in such account fall short of the amount which should have been reasonably credited the amount of its capital as computed under Rule 1 shall be reduced by the amount which has not been so credited or as the case may be the amount of such shortfall. Therefore, it is clear that in case of no provision or shortfall in provision capital is to be reduced. Conversely if excess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the rejection of the claim of the assessee. Accordingly, we reverse the order of the CIT(A) and upholding the ground of the assessee, we direct the Assessing Officer to treat the excess provision for taxation of Rs. 4,31,964 as part of general reserve forming part of capital for the purpose of Rule 1 of Second Schedule to the Companies (Profits) Surtax Act, 1964. 6. In the result, the appeal i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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