9911796707
TMI Blog1969 (10) TMI 20X X X X Extracts X X X X X X X X Extracts X X X X ..... me-tax Act, 1961. The questions referred for our opinion are: " 1. On the facts and circumstances of the case, whether the Tribunal was justified in law in holding that the sum of Rs. 2,56,000 representing plant modernisation and rehabilitation reserve was not to be considered in computing the assessee's capital for the purpose of the Companies (Profits) Surtax Act, 1964 ? 2. On the facts and circumstances of the assessee's case, whether the Tribunal was justified in law in holding that the sum of Rs. 1,00,000 representing loan redemption reserve was not to be considered in computing the assessee's capital for the purpose of the Companies (Profits) Surtax Act, 1964 ? 3. On the facts and circumstances of the assessee's case, whether ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1963. Section 2(5) defines the expression " Chargeable profits " to mean the total income of an assessee computed under the Income-tax Act, 1961, and adjusted in accordance with the provisions of the First Schedule of the Act. Section 2(8) defines the expression " statutory deduction " to mean the amount equal to 10 per cent. of the capital of the assessee as computed in accordance with the provisions of the Second Schedule or an Amount of rupees two hundred thousand, whichever is greater. The excess of the chargeable profits over the statutory deduction is chargeable to tax under section 4. The provisions of the Act are substantially in accordance with the provisions of the Super Profits Tax Act, 1963, which remained operative only for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee as on 1st of April, 1962, were as follows: Rs. Plant modernization and rehabilitation reserve 2,40,000 Loan redemption reserve 3,50,000 Development rebate reserve 99,510 On the 8th of August, 1963, the directors of the assessee in their report to the general body of shareholders proposed the following appropriations out of the profits of the year ending on 31st March, 1963: Rs. Plant modernization and rehabilitation reserve 2,56,000 Loan redemption reserve 1,00,000 Reserve for development rebate 89,557 Dividend reserve 3,15,000 Reserve for super profits tax 2,85,000 The assessee claimed that the above items have to be computed as " other reserves " for the purpose of calculating the capital base. In addition to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd consequently they cannot be regarded as "Reserves" for the purpose of computation of the capital. Therefore, questions Nos. 4 and 6 have to be answered against the assessee. The amount of Rs. 1,03,162 referred to in question No. 5 is said to be the difference between the depreciation computed by the assessee on its assets and the depreciation allowed by the income-tax authorities. It was urged that to the extent of the difference, the value of the assets is enhanced and therefore the said item should be regarded as "Reserve". We are unable to accede to the said contention. The balance-sheet of the company does not show any such item as "Reserve". We are entirely in agreement with the view expressed by the Tribunal regarding the said it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year ending March 31, 1963. The balance-sheet was passed by the general body of the shareholders. The appropriations shown under the different heads in the balance-sheet of the assessee-company are as on March 31, 1963. It is not possible for the board of directors of any company to make the appropriations out of the profits of any year before the close of the year of accounting. The Explanation to rule 1 states that any amount standing to the credit of any account in the books of a company as on the first day of a previous year relevant to the assessment year which is of the nature referred to therein shall not be regarded as a reserve. It follows from the language of the Explanation to the rule that the amounts in the nature of reserves ..... X X X X Extracts X X X X X X X X Extracts X X X X
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