1. Search Case laws by Section / Act / Rule — now available beyond Income Tax. GST and Other Laws Available
2. New: “In Favour Of” filter added in Case Laws.
Try both these filters in Case Laws →
TaxTMI Login
🚀 New: Section-Wise Filter ✕
Just a moment...
1. Search Case laws by Section / Act / Rule — now available beyond Income Tax. GST and Other Laws Available
2. New: “In Favour Of” filter added in Case Laws.
Try both these filters in Case Laws →
Press 'Enter' to add multiple search terms. Rules for Better Search
---------------- For section wise search only -----------------
Accuracy Level ~ 90%
of 
Press 'Enter' after typing page number.
of Press 'Enter' after typing page number.
No Folders have been created
Are you sure you want to delete "My most important" ?
NOTE:
of Press 'Enter' after typing page number.
of Press 'Enter' after typing page number.
All Case Laws
of Press 'Enter' after typing page number.
of Press 'Enter' after typing page number.
All Case Laws
Note
Bookmark
Share
Don't have an account? Register Here
of Press 'Enter' after typing page number.
<h1>Court ruling on nature of provisions for engine inspection, warranty, and technical fees vs. reserves and dividends</h1> The court ruled in favor of the assessee regarding the nature of provisions for engine inspection, warranty, and technical fees, considering them as ... Capital Reserve, Company, Surtax Issues:Assessment of the assessee for the years 1971-72, 1972-73, and 1973-74 - Nature of provisions for engine inspection, warranty, and technical fees - Treatment of general reserve in relation to dividends declared by the company.Analysis:The judgment pertains to the assessment of the assessee for the years 1971-72, 1972-73, and 1973-74, focusing on two main issues. The first issue involves determining whether the amounts set apart for engine inspection, warranty, and technical fees should be classified as reserves or current liabilities. The second issue concerns the treatment of the general reserve concerning dividends declared by the company.Issue 1: Nature of Provisions for Engine Inspection, Warranty, and Technical FeesThe assessee had set aside amounts for engine inspection, warranty, and technical fees, considering them as provisions in its books. However, the Income-tax Officer disallowed this claim, stating that these provisions were current liabilities. The Appellate Assistant Commissioner upheld this decision. The Tribunal, however, ruled in favor of the assessee, considering these provisions as reserves. The Department argued that the provisions represented existing liabilities and should not be treated as reserves. In contrast, the assessee contended that the provisions represented anticipated liabilities without certainty of incurring them, thus qualifying as reserves. The court, referring to relevant precedents, noted that the distinction between 'reserve' and 'provision' under the Companies Act cannot be directly applied to the term 'reserve' under the Surtax Act. It emphasized that a reserve must be a specific sum set apart for future use or a specific occasion. Ultimately, the court agreed with the Tribunal that the amounts in question correctly represented reserves, answering the first question in favor of the assessee.Issue 2: Treatment of General Reserve in Relation to DividendsThe second issue involved whether the general reserve should be reduced by the dividends declared by the company at the annual general meetings. The court referred to a Supreme Court decision and concluded that the general reserve should indeed be depleted by the dividends declared. This question was answered in the affirmative and in favor of the Revenue.In conclusion, the court upheld the Tribunal's decision regarding the nature of provisions for engine inspection, warranty, and technical fees as reserves. It also ruled in favor of depleting the general reserve by the declared dividends. No costs were awarded in this judgment.
TaxTMI 
TaxTMI 
