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TMI Blog1976 (7) TMI 39X X X X Extracts X X X X X X X X Extracts X X X X ..... acts and in the circumstances of the case, the Tribunal was justified in holding that the dividends paid out of the general reserve had to be ignored for the purpose of capital computation as the entire general reserve was in the nature of a reserve ? " This question is raised in relation to computation of capital for the purpose of surtax for the assessment years 1970-71 and 1971-72. So far as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 71, the question ,irises whether this sum of Rs. 2,10,000 forming part of the general reserve is includible in the capital of the company for the purpose of surtax. For the assessment year 1971-72, the relevant date for computation of the capital is December 1, 1969. The position shown by the balance-sheet as on November 30, 1969, is that at the beginning of that year a sum of Rs. 5,15,501 was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alance sufficient to pay the dividend for two years, the said amount ought not to be taken while computing the capital of the company for the purpose of surtax. Such a contention could be accepted only if the directors in the report had specifically stated that for the purpose of payment of dividend recommended by them the past balance standing to the credit of general reserve was only to be utili ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Ltd. [1977] 107 ITR 30 (Bom)] to-day. Unless express provision is made while making a recommendation for utilising particular fund for payment of dividend this principle has to be followed. Following the said principle, in both the years the sums of Rs. 2,10,000 and Rs. 2,25,000 cannot be included in the computation of capital of the company. In the result, our answer to the question referred to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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