9911796707
TMI Blog1993 (4) TMI 32X X X X Extracts X X X X X X X X Extracts X X X X ..... neral reserve' as on October 1, 1970, was required to be reduced by Rs. 9,60,000 being the dividend declared from the general reserve at the annual meeting of the company held on March 19, 1971, in computing the capital of the assessee-company for the purpose of surtax as on October 1, 1970 ? 2. Whether, on the facts and in the circumstances of the case, the Tribunal ought to have held that the sum of Rs. 60,00,000 contributed by Siemens Asia Investments A. G. before October 1, 1970, was to be regarded as a part of the paid-up capital of the assessee as on October 1, 1970 ? 3. Whether, on the facts and in the circumstances of the case, the Tribunal ought to have held that the sum of Rs. 61,20,000 standing to the credit of the capital su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same. In case the Proposed increase in the share capital had taken place, Messrs. Siemens Asia Investments would have contributed 51 per cent. thereof. The said proposal, however, did not materialise on account of certain difficulties including the incurring of losses by the assessee in the years preceding the year under consideration. Finally, the assessee, on July 1, 1970, made the requisite application to the Controller of Capital Issues for permitting it to raise its capital from Rs. 1.20 crores to Rs. 2.40 crores. In the said application, the assessee had outlined the circumstances under which its original move in the year 1967 for issue of share capital to improve the debt-equity ratio was postponed. It was also mentioned therein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts "paid-up share capital" on October 1, 1970, within the meaning of rule 1(i) or within the meaning of rule 1(ii) or reserve within the meaning of rule 1(iii) of the Second Schedule. The Income-tax Officer did not include the above amounts for the purpose of computing the capital of the Company for the purpose of surtax under the Second Schedule to the Act. However, there is no discussion in the order of the Income-tax Officer in this regard. The assessee preferred an appeal before the Appellate Assistant Commissioner. The Appellate Assistant Commissioner did not accept the contention of the assessee that it should be treated as "paid-up share capital" within the meaning of rule 1(i) or "reserve" within the meaning of rule 1(iii) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s adjusted A against the shares allotted. The assessee applied for reference of the questions of law arising out of the above order and the Tribunal has referred the questions under consideration to this court. Hence, this reference at the instance of the assessee. The real controversy that falls for determination thus relates to the point of time when the amount advanced by Messrs. Siemens Asia Investments, Switzerland, to the assessee-company in the years 1967 and 1969, which had been lying with it as loan, partook of the character of paidup share capital of the assessee-company in order to attract rule 1(i) of the Second Schedule to the Surtax Act. Can it be said to have formed part of the paid-up share capital of the company on Octobe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paid-up share capital on any date or at any point of time anterior to the date of allotment of shares by the assessee to Messrs. Siemens Asia Investments which, in the instant case, is March 25, 1971. That being so, rule 1(i) of the Second Schedule is not attracted. We also do not find any force in the alternate contention of the assessee that, if the amount in question is not treated as paid-up share capital, it may be treated as a "reserve" within the meaning of rule 1(iii) of the Second Schedule. The expression "reserve" as used in the Surtax Act came up for interpretation before the Supreme Court in Vazir Sultan Tobacco Co. Ltd. v. CIT [1981] 132 ITR 559. The Supreme Court observed that though "reserve" is not defined, since it occurs ..... X X X X Extracts X X X X X X X X Extracts X X X X
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