1984 (2) TMI 12

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..... erence on a case stated under section 256(1) of the Income-tax Act, 1961. The assessment years involved are 1964-65 and 1965-66, for which the respective previous years are the previous years ended October 31, 1963 and October 31, 1964, respectively. The only point for consideration in the appeal before the Income-tax Appellate Tribunal was as to whether the " Retirement Gratuity Reserves " of Rs. .....

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..... . The Appellate Assistant Commissioner held that the retirement gratuity provisions were " reserves " and not " provisions " and were liable to be included in the computation of the capital for the purposes of the aforesaid Companies (Profits) Surtax Act. This conclusion was upheld by the Tribunal. The question referred to us for determination is as follows: " Whether, on the facts and in the cir .....

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..... f the employee is determined by death, incapacity, retirement or resignation event (cessation of employment) certain to happen in the service career of every employee; moreover, the amount of gratuity payable is usually dependent on the employee's wages at the time of determination of his employment and the number of years of service put in by him and the liability accrues and enhances with the co .....

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..... the Companies Act includes any expenditure contracted for and arising under a contingent liability; but if the sum so appropriated is shown to be in excess of the sum required to meet the estimated liability (discounted present value on a scientific basis) it is only the, excess that will have to be regarded as reserve under clause (7)(2) of Part III of Schedule VI to the Companies Act, 1956." I .....

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..... e treated as provisions and to compute the capital of the assessee company in accordance with the conclusions which the Tribunal reaches. We further clarify that before deciding these questions, an opportunity must be given to the assessee as well as the Department to place such relevant material, as may be necessary, before the Tribunal. Parties to bear and pay their own costs of the reference.< .....

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