9911796707
TMI Blog1978 (11) TMI 18X X X X Extracts X X X X X X X X Extracts X X X X ..... this question has been referred at the instance of the revenue. There is another reference arising out of another application made by the assessee. A separate paper book has been filed in respect of the same and by our order we have directed the same to appear as a separate reference. We are concerned in this reference with only the question referred to above. The facts admitted and/or not disputed are as follows : There is an Act called the Super Profits Tax Act, 1963, which received the assent of the President on the 4th May, 1963. The relevant provisions of the said Act are as follows : Section 4 " Charge of tax.--Subject to the provisions contained in this Act, there shall be charged on every company for every assessment year com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation 1.--A paid up share capital or reserve brought into existence by creating or increasing (by revaluation or otherwise) any book asset is not capital for computing the capital of a company for the purposes of this Act. Explanation 2.--Any premium received in cash by the company on the issue of its shares standing to the credit of the share premium account shall be regarded as forming part of its paid up share capital. Explanation 3.--Where a company has different previous years. in respect of its income profits and gains, the computation of capital under rule 1 and rule 2 of this Schedule shall be made with reference to the previous year which commenced first. " This Bill is dated 28th February, 1963. I ought to point out that by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to as the surtax) in respect of so much of its chargeable profits of the previous year or previous years, as the case may be, as exceed the statutory deduction, at the rate or rates specified in the Third Schedule. 5. Return of chargeable Profits.--(1) In the case of every company whose chargeable profits assessable under this Act exceeded during the previous year the amount of statutory deduction, its principal officer, or where in the case of a non-resident company any person has been treated as its agent under section 163 of the Income-tax Act, such person, shall furnish a return of the chargeable profits of the company during the previous year in the prescribed form and verified in the prescribed manner and setting forth such other p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... half in the Official Gazette or any banking institution (not being a financial institution notified as aforesaid) or any person in a country outside India : Provided that such moneys are borrowed for the creation of a capital asset in India and the agreement under which such moneys are borrowed provides for the repayment thereof during a period of not less than seven years. Explanation.--For the removal of doubts it is hereby declared that any amount standing to the credit of any account in the books of a company as on the first day of the previous year relevant to the assessment year which is of the nature of item (5) or item (6) or item (7) under the heading ' RESERVES AND SURPLUS ' or of any item under the heading ' CURRENT LIABILITI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anuary 1, 1963, made the profits of the calendar year 1962 taxable in a retrospective manner. In the opinion of the Tribunal that did not convert an amount otherwise to be treated as a reserve into a provision. It, therefore, directed the ITO to include the amount of Rs. 9 lakhs also in the computation of the assessee's capital as in its opinion it was actually in the nature of a reserve on the first day of the previous year relevant to the assessment year under reference. Hence, this reference. On behalf of the revenue, Mr. Sengupta has submitted that this amount cannot be treated as a reserve but it must be treated as a provision for taxation. Mr. Sengupta in this connection has placed reliance on the case of Braithwaite Co. (India) L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion is whether it is to be treated as a reserve. What is known as reserve has been discussed in the various decisions of this court and also the Supreme Court. In the present case, we are not in a position to accept that on the relevant date April 3, 1963, there was any known liability, whether contingent or otherwise. There was no Act at that point of time. Merely there was a Bill. A Bill might or might not be changed into an Act. We are unable to accept the contention of the revenue that the Bill must be treated as a contingent liability. A Bill introduced in Parliament cannot create any liability, contingent or otherwise. In the present case, when this amount was earmarked on April 3, 1963, or a little earlier as found by the Tribunal th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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