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TMI Blog1996 (9) TMI 41X X X X Extracts X X X X X X X X Extracts X X X X ..... ld be deducted and not the higher sum of Rs. 1,23,000 approved for appropriation after the end of 1975 ? 2. Whether the Tribunal was right in law in holding that the appropriation of the sum of Rs. 1,23,000 dated back only to January 1, 1976, and not to the last date in the previous year 1975, i.e., December 31, 1975 ? 3. Whether the Tribunal was right in law in holding that the appropriation of amount to the reserve fund by itself does not tantamount to transfer to the reserve fund within the provisions of section 17(1) of the Banking Regulation Act, as specified in rule 1(xi) of the First Schedule to the Companies (Profits) Surtax Act, 1964 ?" The assessee was formerly known as South India Bank Limited (Tirunelveli) and for the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the end of 1975. Accordingly, the assessee's appeal was dismissed. Before us learned counsel for the assessee submitted that the appropriation of Rs. 1,23,000 out of the profits for the year 1975 to the reserve fund as recommended by the board's resolution dated April 24, 1976, and approved by the annual general meeting of the shareholders would date back to the last date of the previous year, viz., December 31, 1975, in view of the Supreme Court decisions in CIT v. Mysore Electrical Industries Ltd. [1971] 80 ITR 566 and Indian Tube Co. Pvt. Ltd. v. CIT [1992] 194 ITR 102. It was further submitted that consequently under rule 1(xi) the sum which is transferred to the reserve fund during the previous year will be Rs. 1,23,000 even though t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Act, 1949. A sum of Rs. 1,23,000 was appropriated for transfer to the reserve fund by the board's resolution, dated April 24, 1976, passed by the annual general meeting of the shareholders. According to the assessee, this sum of Rs. 1,23,000 should be deducted under rule 1(xi) of the First Schedule to the Surtax Act. According to sub-clause (5) of section 2 of the Companies (Profits) Surtax Act, 1964, "chargeable profits" means the total income of an assessee computed under the Income-tax Act, 1961 (43 of 1961), for any previous year or years, as the case may be, and adjusted in accordance with the provisions of the First Schedule. Rule 1(xi) of the First Schedule states as under : "In the case of a banking company-- (a) any sum wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : "1. Subject to the other provisions contained in this Schedule, the capital of a company shall be the aggregate of the amounts, as on the first day of the previous year, relevant to the assessment year of--. . . (ii) its reserves, if any, created under proviso (b) to clause (vib) of sub-section (2) of section 10 of the Indian Income-tax Act, 1922 (11 of 1922), or under sub-section (3) of section 34 of the Income-tax Act, 1961 (43 of 1961)." According to rule 1 of the Second Schedule, the capital of a company shall be the aggregate of the amounts as on the first day of the previous year relevant to the assessment year. According to the facts arising in that case, Indian Tube Co. P. Ltd. v. CIT [1992] 194 ITR 102 (SC), in respect of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rding is different from that occurring in rule 1(xi) of the First Schedule. Reliance was also placed upon a decision of the Supreme Court in the case of CIT v. Mysore Electrical Industries Ltd, [1971] 80 ITR 566. According to the facts arising in the abovesaid case, out of the profits of the respondent-company for the accounting period ending March 31, 1963, the directors of the company appropriated the following amounts towards reserves on August 8, 1963 ; (1) Rs. 2,56,000 as plant modernisation and rehabilitation reserve ; (2) Rs. 1,00,000 as loss of repatriation reserve ; and (3) Rs. 89,657 as development rebate reserve. The question was whether these amounts could be included in computing the capital of the respondent as on Apr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ransferred during the previous year to the reserve fund, the assessee is not entitled to ask for deduction under rule 1(xi). The assessee's contention that the sum of Rs. 1,23,000, being the amount appropriated for transfer to the reserve fund by the board's resolution which was approved by the general meeting held on April 24, 1976, should be taken into account as if it was actually transferred during the previous year so as to enable the assessee to claim deduction under rule 1(xi) of the First Schedule cannot be accepted. Accordingly, we see no infirmity in the order passed by the Tribunal in holding that the deduction of Rs. 1,23,000 is not possible under rule 1(xi) of the First Schedule to the Companies (Profits) Surtax Act. In that vi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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