Apportionment of reserve and surplus under reorganisation law governs distribution; asserted tax liability cannot reduce the successor's share.

Under the Uttar Pradesh Reorganisation Act, 2000, the Central Government's apportionment order governed division of the reserve and surplus of the erstwhile Forest Corporation, fixing the ratio at 46:54 between the successor corporations. The later order left that allocation unchanged, so the successor entity claiming the 54% share was entitled to receive it on that basis. An asserted tax liability could not be used to reduce the share because the corporation's income had been exempt under Section 12AA of the Income-tax Act, 1961, and the amount sought to be adjusted was treated as interest on FDRs rather than a deductible apportioned liability.

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Issues: Whether the petitioner was entitled to release of 54% of the reserve and surplus of the erstwhile Forest Corporation under the Central Government's apportionment order, and whether the amount claimed could be reduced by alleged tax liability.

Analysis: The apportionment dispute arose under the Uttar Pradesh Reorganisation Act, 2000, which contemplates division of assets and liabilities of statutory corporations by mutual agreement and, failing that, by directions of the Central Government. The Central Government's order dated 13.02.2004 directed that the reserve and surplus shown in the balance sheet of the erstwhile corporation for the year ending 31.03.2001 be divided in the ratio of 46:54 between the successor corporations, and the later order dated 28.07.2004 left that apportionment unchanged. The claim of tax liability was rejected because the corporation had been granted exemption under Section 12AA of the Income-tax Act, 1961, and the amount sought to be adjusted was treated as interest on FDRs rather than a deductible liability falling for inter-State apportionment.

Conclusion: The petitioner was held entitled to 54% of the reserve and surplus, and the respondent was directed to release the quantified amount without deduction on account of the asserted tax liability.

Final Conclusion: The writ petition succeeded on the basis that the Central Government's apportionment order governed the distribution of the reserve and surplus, and no sustainable tax liability justified reducing the petitioner's share.

Ratio Decidendi: Where the Central Government has validly apportioned the reserve and surplus of an erstwhile statutory corporation following reorganisation, that apportionment governs unless lawfully altered, and an asserted tax component cannot be deducted when the underlying income stands exempt and the claimed amount is not shown to be an apportioned liability.

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