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TMI Blog1985 (2) TMI 32X X X X Extracts X X X X X X X X Extracts X X X X ..... in the share capital of the assessee company as a result of capitalisation of part of its reserves was not liable to be included in the capital base under rule 3 of the Second Schedule to the Companies (Profits) Surtax Act ? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the inclusion of the aforementioned sum of Rs. 11,43,333 in the capital base in the original assessment for the assessment year 1967-68 was a mistake apparent from the record and that the Income-tax Officer had jurisdiction to rectify that mistake under section 13 of the Companies (Profits) Surtax Act, 1964, so as to exclude that sum from the capital base?" The facts leading to the said reference are as stated hereu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der of the Tribunal in the case of M/s. Alkali and Chemical Corporation of India Ltd. came up for consideration before this court. The decision of this court is in Alkali and Chemical Corporation of India Ltd. v. CIT [1980] 122 ITR 490. In that case, in the original surtax assessment of the assessee-company for the assessment year 1967-68, the ITO had included in the assessee's capital a sum of Rs. 41,44,658 under r. 3 of Sch. II to the Surtax Act as being addition to the company's share capital during the relevant previous year by the issue of bonus shares from out of the assessee's general reserve and a part of its dividend equalisation reserve, losing sight of the fact that there would be a corresponding reduction in the reserves. The IT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the share capital by the issue of bonus share, the corresponding decrease in the amount of reserves cannot be overlooked. It may be possible to take two views of the matter but it appears to us that an alternative view can only be taken by misreading the Rules. For the reasons aforesaid, we are of the opinion that the rectification of the capital base on this count under s. 13 of the Surtax Act for the assessment year 1967-68 is sustainable." Dr. Debi Pal, the learned counsel appearing for the assessee, submitted that in the case of CIT v. Sundaram Clayton Ltd. [1983] 140 ITR 235, the Madras High Court held that a mere capitalisation of the reserves and issue of bonus shares subsequent to the first day of the previous year, could not c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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