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TMI Blog1991 (4) TMI 87X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 4,01,10,167 as at January 1, 1972, for the purpose of computing the capital in terms of rule 1 of the Second Schedule to the Companies (Profits) Surtax Act, 1964, for the assessment year 1973-74 ? 2. Whether, on the facts and in the circumstances of the case, the debenture redemption reserve of Rs. 1,41,00,000 constitutes a reserve includible in the computation of capital in terms of rule 1 of the Second Schedule to the Companies (Profits) Surtax Act, 1964, for the assessment year 1973-74 ? 3. Whether, on the facts and in the circumstances of the case, the gratuity reserve of Rs. 17,00,000 constitutes a reserve includible in the computation of capital in terms of rule 1 of the Second Schedule to the Companies (Profits) Surtax Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the profits, he contended that these two reserves ought to be treated as reserves rather than provisions. Shri Mehta also invited our attention to the Calcutta High Court decision in the case of CIT v. Placid Lid. [1984] 150 ITR 74 and the Karnataka High Court decision in the case of Addl. CIT v. Bharat Fritz Werner (P.) Ltd. [1979] 118 ITR 25, where redemption reserve in respect of preference shares was held to be a "reserve". We have gone through the above three decisions of the Supreme Court as well as the Calcutta and Karnataka High Courts' decisions relied on by Shri Mehta carefully. No doubt, there is an observation in the Supreme Court decisions that a provision is a charge against profits. It is, however, seen that in CIT v. Lax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... debentures, the right to get debentures redeemed vest in the debenture-holders. The two cases are, therefore, not applicable in the facts of this case. Accordingly, following our judgment in the assessee's own case in CIT v. National Rayon Corporation Ltd. [1986] 160 ITR 716, we would hold that the debenture redemption reserve is not a reserve and answer the second question in the negative and in favour of the Revenue. We will also answer the third question in the negative and in favour of the Revenue subject only to this that when the matter goes back to the Tribunal for passing an order in accordance with the judgment of this court, the Tribunal will consider whether the gratuity reserve of Rs. 17 lakhs is in excess of the assessee's a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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