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TMI Blog1954 (8) TMI 41X X X X Extracts X X X X X X X X Extracts X X X X ..... al fact is that the' balance sheet of the assessee company as at 31-3-1946, or what is the same thing, 1-4-1946, showed as unappropriated balance of ₹ 12,33,417/-. That sum was made up of two smaller sums. The first of the latter sums was an amount of ₹ 44,233/- which had been carried forward out of the balance as at 31-3-1945, and the second sum wets an amount of ₹ 11,89,183/-which was the balance of the profit for the year ending on 31-3-1946. The assessee company claimed that it was entitled to have the entire sum of ₹ 12,33,4177- treated as a reserve for the purposes of the computation of its capital under Rule 2(1) of Schedule II to the Business Profits. Tax Act of 1947. The Tribunal allowed the assessee's claim with regard to the smaller sum of ₹ 44,233/-, but rejected it with respect to the larger sum of ₹ 11,89,183/-. 3. With regard to the second chargeable accounting period, the material fact is that the balance sheet as at 31-3-1948, or what is the same thing at as 1-4-1948, showed an unappropriated balance of ₹ 11,95,043/-. That sum was made up of two smaller sums. The first of those smaller sums was an amou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pital of the company and the capital, again, has got to be computed by reference to the paid-up share capital and the reserves as on the first day of the relative, chargeable accounting period. It is in that way that the question of a particular amount being or not being entitled to be treated as a reserve becomes relevant. It only requires to be added that so far as chargeable accounting periods ending on or before 31-3-1947 are concerned, the relevant provisions are Section 2(1)(a), Business Profits Tax Act read with Rule 2 (1) of Schedule II to the same Act, but so far as chargeable accounting periods beginning after 31-3-1947 are concerned, the amount of abatement is such sum as may be fixed by the annual Finance Act. The Finance Act of 1948, however, has virtually laid down the same standard as the two provisions I have already mentioned. It has been necessary to add this statement, because one of the chargeable accounting periods concerned in the present case commenced on 1-4-1948. 6. The only distinction between the case decided by the Supreme Court and the present case is that what their Lordships had to consider, appears to have been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... distinction between the two for the purposes of capital computation. It follows that in so far as the Tribunal allowed the smaller sums, it was in error and in so far as it disallowed the larger sums, it decided rightly. The answer to the first question must, therefore, be in the negative and that to the second question in the affirmative. 7. A third question has also been referred to this Court in the following terms: Whether the Income Tax Officer was correct in holding that advance payment of tax under Section 18A was not a reserve of the assessee mentioned in Rule 2 (1) of Schedule II. The relevant facts are that during the period ending on 31-3-1948, the assessee company made an advance payment of ₹ 13,54,054/- under Section 18-A, Income Tax Act. It was claimed that this sum ought to be treated as a reserve, inasmuch as its true character was that it had been set apart for the purpose of being applied to the discharge of the tax liability for the then current year, although it might have been set apart in the form of a deposit with the Government. The Tribunal in its appellate order, dealt with the question on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been shown on the capital and liability side of the balance sheet, had been allowed by the Income Tax Officer as a reserve. But the assessee company had shown the amount paid under Section 18-A a second time on the assets side of the balance sheet and it was that sum which had been disallowed. In order that there may be no mistake about the matter, it would be better to quote the exact language of the Appellate Assistant Commissioner. He observed as follows: It is seen that in the Balance Sheet of the appellant company on 31-3-1948 the sum of ₹ 13,54,054/- appears on the asset side as advance payment of tax under Section 18-A. On the capital and liabilities side the reserve for Income Tax, super-tax and business profits tax was ₹ 36,67,481/- and it is the gross figure. In the circumstances, the appellant company has no grievance and cannot claim that the advance payment of tax appearing on the asset side of the Balance Sheet should be also considered in the reserve. The reserve for Income Tax shown in the Balance Sheet is not arrived at after deducting the advance payment of tax but it is the gross figure which has been considered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ne the question raised thereby and, therefore, we must refer the case back, so far as the third question is concerned, to the Appellate Tribunal in order that we may be furnished with a correct statement of facts which will reconcile the discrepancy between the basis on which the Appellate Assistant Commissioner had proceeded and the basis adopted by the Tribunal itself. 10. Before parting with this case, I find it necessary to repeat once again what I had occasion to say during the last sittings of this Bench. The first appellate order in the present case was passed by Mr. S.M. Gupta and Mr. B.M. Cbatrath. The second appellate order was passed by Mr. K.N. Bajgopal Sastri and Mr. A.L. Sahgal. The Statement of the Case was prepared and submitted by Mr. B.M. Chatrath and Mr. A.R. Aggarwal. The appellate order relating to the first chargeable accounting period proceeded entirely on the basis that the smaller sum of ₹ 44,2,33/- had suffered taxation, whereas the larger sum of ₹ 11,89,183/- had not yet been taken into consideration for Income Tax purposes at all. It is clear that the Tribunal proceeded on the qualification contained in Rule 2(1) of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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