9911796707
TMI Blog1991 (1) TMI 183X X X X Extracts X X X X X X X X Extracts X X X X ..... the Income-tax Act, 1961 the assessee was entitled to depreciation of Rs. 42,56,761 and the said depreciation was allowed to the assessee in the assessment under the Income-tax Act, 1961. The IAC(A) observed that since the depreciation allowed in the assessment for income-tax was more than the depreciation mentioned in the books of accounts of the assessee, the general reserve would get reduced by the difference between the two figures which came to Rs. 19,28,053. Consequently, in the computation for sur-tax he reduced the general reserve as shown in the balance sheet by the above mentioned amount for determining the capital of the company. The Commissioner of Sur-tax (Appeals) before whom the assessee filed appeal confirmed the order of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly provided in the books. 4. We have considered the rival submissions and facts on record. Section 4 of the Act lays down that subject to the provisions contained in the Act there shall be charged on every company sur-tax in respect of so much of its chargeable profits of the previous year as exceed the statutory deduction at the rate or rates specified in the Third Schedule. It is clear from this provision that there are three ingredients in the processing of sur-tax. Chargeable profit which is one of them is the tax base. Chargeable profits are equivalent to the total income of the company as determined under the Income-tax Act, as adjusted for the purposes of sur-tax in three-fold ways specified in Rules 1 to 3 of the First Schedule to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... computation of capital as are laid down in Second Schedule. 5. In the present case, the dispute relates to computation of capital and as such we have to look to the provisions of Second Schedule. Rule 1 of the Second Schedule lays down that the capital of the company shall be the aggregate of the amounts as on the first day of the previous year relevant to the assessment year, of (1) its paid up share capital, (2) its reserves, if any, created under certain provisions of the Income-tax Act, 1922 and (3) its other reserves as reduced by the amounts credited to such reserves as have been allowed as deduction in computing the income of the company for the purposes of Income-tax Act. In the present case, no such amounts have been credited ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Surtax (Appeals) has relied is not applicable to the facts of the case. In that case, the assessee had been claiming depreciation according to the written down value method upto the earlier assessment year but in the year under consideration it changed the said method and adopted the straightline method and adjusted the excess depreciation as computed under section 205(2)(b) of the Companies Act, 1956. On the facts of the said case Explanation 1 to Rule 2 of Second Schedule was attracted under which a reserve brought into existence by creating or increasing (by revaluation or otherwise) in book assets was not capital for computing the capital of the company for the purpose of the Act. To the facts of that case Explanation 1 clearly applied ..... X X X X Extracts X X X X X X X X Extracts X X X X
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