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TMI Blog1990 (1) TMI 1X X X X Extracts X X X X X X X X Extracts X X X X ..... he close of the accounting period should be excluded from computation of capital for purpose of surtax assessment ?" The facts as narrated by the Tribunal in the statement of case are as under : While computing the capital for the purpose of assessment under the Surtax Act for the assessment year 1974-75, the Income-tax Officer added development rebate reserve and general reserve shown at Rs. 1,13,579 and Rs. 33,11,275 respectively to the paid up capital of the company. Before the Appellate Assistant Commissioner, the assessee claimed that, in its books, the balance in the general reserve account was Rs. 38,44,876 and, therefore, contended that the amount of dividend of Rs. 4,20,022 should not be deducted from the balance in the general ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fter hearing the parties, held as under: "We have considered the facts of the case and we find that similar question came up for consideration before us while sitting in A. Bench in the case of Jiwan Lal (1929) Ltd. v. ITO in STA No. 1 of 1977-78. There, one of the questions for consideration was the exclusion of the provision for purposes of dividend in the computation of capital. After considering the various provisions of the Act and various decisions of the Calcutta High Court and other High Courts, we took a view that such provision could not be excluded from the computation of capital. It was held that any such provision was 'reserve' for being included in the capital computation base. We find that this question was considered by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... close of the accounting period. However, we agree that there is a mistake in the order of the Appellate Assistant Commissioner and the amount of general reserve which was to be taken for this purpose would be an amount of Rs. 38,44,876 as reduced by the development rebate reserve of Rs. 1,23,579 which has separately been included by the Income-tax Officer in the computation of capital. We, therefore, direct that the amount to be taken for general reserve should be Rs. 37,31,297 and not Rs. 38,44,876 as stated by the Appellate Assistant Commissioner. The Income-tax Officer is directed to work out on the above figure accordingly." The rules for computation of capital of companies for the purpose of surtax have been laid down in the Second ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r and placed before the board of directors that the board of directors can make a proper assessment of the financial position of the company. At that juncture of time, it is to be declared as to whether or not payment of a particular sum by way of dividend shall be made. The directors will have to decide and recommend to the share holders as to what has to be done with the profits of the company. The profits may be utilised for creation of general and special reserves or for meeting known or contingent liabilities. If a portion of the profits is to be distributed to the shareholders by way of dividend, then that recommendation along with other proposals are to be placed before the share holders at the annual general meeting. If the director ..... X X X X Extracts X X X X X X X X Extracts X X X X
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