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TMI Blog1984 (3) TMI 29X X X X Extracts X X X X X X X X Extracts X X X X ..... ich was not ascertainable. On appeal, the AAC held that no specific liability has been covered by Rs. 1 lakh and, therefore, the reserve could only be general reserve and as such the exclusion of Rs. 1 lakh from the capital computation was not justified. The assessee had also claimed before the ITO that the difference between the income-tax written down value and the written down value as per books of the assets as depreciation reserve should be included in the capital computation for surtax purposes. Holding that this reserve is not reflected in the balance-sheet of the assessee, the ITO excluded the amount. On appeal, the AAC, relying on the decision of this court in United Nilgiri Tea Estates Company Ltd. v. CIT [1974] 96 ITR 734, uphe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... serve at all, but only an appropriation set apart to meet a specific future liability, the amount of which was not presently ascertainable. The AAC, however, took the view that it is a free general reserve and there was no future specific liability against which the said sum could be adjusted or appropriated and, therefore, the exclusion of Rs. 1 lakh from the capital computation by the ITO was not warranted. The Tribunal drew a distinction between a provision and a reserve and took the view that the sum of Rs. 1 lakh shown as development and contingency reserve had to be taken as a general reserve and included in the capital computation for surtax purposes. This view taken by the Tribunal finds support from the decision in Vazir Sultan T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding to the Tribunal, Rs. 1 lakh shown in the development and contingency reserve bears the same nature and character as Rs. 12 lakhs shown in the general reserve. On the facts of this case, we are inclined to agree with the order of the Tribunal that the above decision of the Supreme Court clearly applies. The first question is, therefore, answered in the affirmative and against the Revenue. Coming to the second question, as already stated, the assessee's claim is that the difference between the income-tax written down value and the written down value as per the books of assets amounting to Rs. 1,69,317 should be included in the capital computation for surtax purposes. Though this claim was rejected by the ITO, the same was upheld by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... learned counsel for the assessee, however, actually the disputed amount has been shown as an excess provision in the balancesheet and the Tribunal was in error in proceeding that it was not shown in the balance-sheet and, therefore, it was a secret reserve. He then states that the decision in English Electric Co. of India Ltd. v. CIT [1981] 132 ITR 251 (Mad), admittedly proceeded on a factual error and, therefore, it should be taken to have been wrongly decided. It is also pointed out that the said decision is under appeal before the Supreme Court and, therefore, this court has to decide the question independently without reference to the said decision. It is significant to note that the learned counsel for the Revenue also in a way concede ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enue that since the excess is not an appropriation out of profits, it cannot be taken as a reserve. Though the Tribunal proceeded on the basis that the excess depreciation has not been shown in the accounts as a reserve and, therefore, it should be taken to be a secret reserve and that as a secret reserve the assessee is entitled to claim its inclusion in the computation of capital, it is seen that the excess depreciation has been actually shown separately in the balance-sheet. This factual position is not seriously disputed by the Revenue. Therefore, it is unnecessary to go into the other question raised by the learned counsel for the Revenue that it is only banking companies who are enabled to have secret reserves and in the case of compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee considered that its assets depreciated at a figure smaller than what was allowed under the I.T. Act and in such cases the difference cannot be claimed as a reserve. But both the assessee and the Revenue concede before us that the basic assumption that the assessee depreciated its assets at a figure smaller than what was allowed under the I.T. Act is not correct and that in fact the assessee had depreciated its assets at a figure higher than what was allowed under the Act. But on the factual finding in that case that there is no excess depreciation than what was allowed under the I.T. Act but there was only a deficiency, the decision in that case cannot be taken exception to. But, whereas, in this case, the assets have been deprecia ..... X X X X Extracts X X X X X X X X Extracts X X X X
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