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TMI Blog1983 (1) TMI 26X X X X Extracts X X X X X X X X Extracts X X X X ..... e of in ascertaining the amount of its paid up capital ? 2. Whether, on the facts and in the circumstances of the case, Rs. 15,56,786, being the difference between the depreciation adjusted in the books of the assessee up to November 30, 1965, and the corresponding deductions allowed in the corresponding assessment to income-tax in respect of the assessee's trade investments, is to be considered as reserve for the purpose of computing the capital base for ascertaining the statutory deduction ? " The first question raised at the instance of the Department directs an inquiry as to the scope of the appellate jurisdiction of the Tribunal in cases arising under the Companies (Profits) Surtax Act, 1964. Section 12 of this Act provides for an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... res in the balance-sheet into their rupee equivalents. The Commissioner considered that the officer had applied a wrong rate of exchange. He accordingly set aside the order of the ITO and directed him to redo the assessment by recomputing the capital by applying the exchange ratio of Is. 6d. to the rupee. The assessee appealed to the Tribunal against the Commissioner's order in revision. At the hearing of the appeal, the assessee did not dispute the Commissioner's direction to apply the exchange rate of Is. 6d. to a rupee, as the appropriate conversion rate of sterling into rupees. However, the learned counsel for the assessee urged before the Tribunal that this rupee sterling ratio was changed half way through the relevant previous year be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t decisions of this court which have adopted the Full Bench ruling and applied the principle of that judgment for defining the scope of the jurisdiction of the Income-tax Appellate Tribunal in appeals arising under the I.T. Act and other direct taxes enactments: (CIT v. Indian Express (Madurai) Pvt. Ltd. [1983] 140 ITR 705 (Mad)). Following these decisions, we must hold that the Tribunal has power to entertain a new point in the appeal. We may, however, point out that while entertaining the new plea put forward by the assessee, the Tribunal did not themselves enter into the merits of the question at issue, but remanded the matter to the Commissioner for a fuller consideration. Mr. Jayaraman made a minor grievance of the Tribunal's decisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... profit and loss account at rates higher than the rates granted to the company's depreciable assets under our I.T. Act. To the extent, therefore, an excess provision has been made by the company every year and charged to profit and loss, to that extent there has been " secret reserve " built up for the company. As respects another item in the balance-sheet, namely, trade investment figuring on the assets side of the balance-sheet as at November 30, 1965, the assessee-company claimed that they were shown at a valuation much lower than their real value. The claim of the assessee was that in this fashion also a " secret reserve " had been created which is not discernible on the surface from the figures displayed in the balance-sheet. It wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3): " The amount of Rs. 1,03,162 ... is said to be the difference between the depreciation computed by the assessee on its assets and the depreciation allowed by the income-tax authorities. It was urged that to the extent of the difference, the value of the assets is enhanced and, therefore, the said item should be regarded as 'reserve'. We are unable to accede to the said contention. The balance-sheet of the company does not show any such item as 'reserve'. " In the latest decision of the Supreme Court in Vazir Sultan's case [1981] 132 ITR 559, it was held that " reserve ", whether general or specific, can be called a " reserve " only if the amount in question is kept apart for the requisite purpose. The court further observed that som ..... X X X X Extracts X X X X X X X X Extracts X X X X
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