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TMI Blog1979 (10) TMI 21X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 13 of the Companies (Profits) Surtax Act, 1964 ? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the depreciation provided in the accounts of the company in excess of the amount allowed as a deduction in the computation of its income for purposes of the Income-tax Act, 1961, was not a reserve for the purposes of Surtax Act ? " The reference relates to the assessment years 1964-65, 1965-66 and 1966-67. The assessee filed returns for each of these years. For instance, for the assessment year 1964-65, in the return filed on 1st February, 1965, the capital computation was shown as Rs. 63,35,781. Later, a revised return was filed on 27th September, 1968, showing the capital at Rs. 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... completed the assessments accordingly. Subsequently, the ITO realised that there was an error in the assessment which required to be rectified. He, therefore, issued appropriate notices under s. 13(1) of the Act. The assessee filed its objections, and, overruling them, the ITO rectified the assessments. The resultant figure in the revised assessment represented the capital computation shown in the original return. The assessee appealed to the AAC who found that the difference between the written down value in the income-tax records and the value in accordance with the assessee's books was not reflected in the balance-sheet as any reserve and he, therefore, confirmed the orders of rectification. The assessee appealed for all these years ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f i. paid up capital; ii. reserves, if any, created for allowance of development rebate iii. other reserves as reduced by the amounts credited to such reserve as have been allowed as deductions in computing the income of the company for the purposes of the Indian I.T. Act, 1922, or the I.T. Act, 1961. It is unnecessary to refer to the rest of the rules in the Second Schedule. This is a case where the question is whether there is any reserve, and if there is any such reserve, whether any amounts credited to such reserve have been allowed as deductions in computing the income of the company for the purposes of the I.T. Act, 1961. One of the items of deduction for the purposes of the I.T. Act is depreciation. It is common knowledge t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h any justification that when the ITO proceeded to consider that the original return, and not the revised return was the proper return, the error is not an apparent error. What is sauce for the goose is also sauce for the gander. In the balance-sheet, there is no reserve with reference to the difference between the written down value under the I.T. Act and the book value of the assets. The balance-sheet has been filed along with the return filed by the assessee. The error discovered by the ITO is an apparent error, apparent from the assessee's own balance-sheet, and, therefore, there could be no valid objection to s. 13(1) being invoked on the facts here. The first question has thus to be, and is, answered in the affirmative and in favour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and submitted its returns for the assessment year 1962-63. In this return, the Indian company calculated the depreciation allowable on the assets on the same basis as the predecessor company had claimed in its income-tax assessment returns for the previous years. In other words, the Indian company adopted the written down value in accordance with the income-tax records of the foreign company in order to arrive at the depreciation for the assessment year 1962-63. Subsequently, along with a letter, the auditors of the Indian company furnished an amended statement of depreciation on the basis of the actual cost of fixed assets to the assessee. This cost was based on the shares issued to the foreign company for the assets taken over. The ITO ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er drew our attention to two other decisions. The first is of the Mysore High Court in Mysore Electrical Industries Ltd. v. Commr. of Surtax [1971] 80 ITR 571 (Mys). In that case, the question was whether a sum of Rs. 1,03,162, which represented the difference between the depreciation computed by the assessee on its assets and the depreciation as allowed by the I.T. authorities, could be considered as a reserve. The balance-sheet of the assessee in that case also did not contain any such item as a reserve. The High Court was in agreement with the view expressed by the Tribunal that there was no reserve, which had to be taken into account for the purpose of capital computation. There is no discussion in the said judgment, but the matter appe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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