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TMI Blog1974 (7) TMI 28X X X X Extracts X X X X X X X X Extracts X X X X ..... d distribution of electric energy. Under the provisions of the Electricity (Supply) Act, 1948, the company, which owned the electrical undertaking, had to set apart, (1) a reserve called the "Tariffs and Dividends Control Reserve" ; and (2) a reserve called the "Reserve for grant of Rebate to Consumers", as provide in Paragraph II of the Sixth Schedule to the Electricity (Supply) Act, 1948, as also a reserve called the "Contingencies Reserve" as provided in Paragraph III of the same schedule. As on March 31, 1956, the following amounts stood to the credit of the said three reserves : Rs. Tariffs and Dividends Control Reserve ... 77,222 Contingency Reserve ... 47,500 Rebate to Consumers ... 82,215 These amounts were admittedly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 8,81,000). This is on the basis that the "accumulated profits" of the company as on March 31, 1959, was Rs. 14,68,213. The assessee, however, contended that out of the amount of Rs. 4,35,525 treated as part of the "accumulated profit" in the Company's assessments, the three reserves referred to above, aggregating to Rs. 2,06,937, created under the provisions of the Electricity (Supply) Act, 1948, and which could not be dealt with by the company but had to be handed over to the purchaser of the undertaking as per the provisions of that statute, cannot be treated as "accumulated profits" at all. It was also contended that another sum of Rs. 1,34,202, which was the profit for the year ending March 31, 1956, cannot be treated as "accumulat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me Court in First Income-tax Officer, Salem v. Short Bros. Ltd. At the instance of the assessee, the following two questions have been referred to this court in each of the three cases : "(1) Whether, on the facts and in the circumstances of the case, the sum of Rs. 4,35,525 represented the accumulated profits for purposes of section 2(6A)(c) of the Income-tax Act ? 2. Whether, on the facts and in the circumstances of the case, any portion of the distribution was liable to be assessed as capital gains for the assessment years 1960-61, 1961-62 and 1962-63 ?" Mr. Ramachandran, the learned counsel for the assessee, contends that the Tribunal is in error in treating the entirety of Rs. 4,35,525 as "accumulated profits" of the compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unts is "Profits" of the company. On the above considerations, the Tribunal had in fact held earlier in the assessment of the company that the amounts standing to the credit of the three reserves continued to retain the character of "profits". That order of the Tribunal has become final. Even otherwise, we are satisfied that the amounts standing to the credit of the said three reserves as also the profit for the year ending March 31, 1956, formed part of the "accumulated profits" for the purpose of section 2(6A)(c) of the Income-tax Act. Dealing with a similar contention, we had also expressed in G. Ramaswamy Naidu v. Commissioner of Income-tax as follows : "Whether it is accumulated profit or not depends normally on the question whet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for those years too, and, in that view, issued direction to the Income-tax Officer to work out the "capital gains" for all the three assessment years in accordance with law, bearing in mind the decision of the Supreme Court in Commissioner of Income-tax v. Girdhardas Company (P.) Ltd. The contention of the learned counsel for the assessee with reference to the said sum of Rs. 10,32,688 is that section 46(2) of the Income-tax Act is applicable only for the assessment year 1962-63 and, therefore, the decision of the Tribunal that the assessee is liable to capital gains under section 46(2) of the amounts received by him during the assessment years 1960-61 and 1961-62 is erroneous. The learned counsel refers to the decision of the Supreme Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inquishment or transfer of the capital assets and that in the case of distribution of capital assets of a company in liquidation, there being no sale, exchange, relinquishment or transfer involved, it would not attract the charge under section 12B. This ruling of the Supreme Court has to apply to the assessee's case so far as the assessment years 1960-61 and 1961-62 are concerned, for, in those years, the charge could be brought only under section 12B, if at all. The Tribunal having recognised the fact that section 46(2) was applicable only for the year 1962-63, it held that the principle of that section will apply even for the earlier assessment years. That view of the Tribunal is contrary to the decision of the Supreme Court in the above- ..... X X X X Extracts X X X X X X X X Extracts X X X X
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