Incorporated tax definitions and balance-sheet reserves controlled surtax computation, with prior ruling followed on identical facts.

Where the Companies (Profits) Surtax Act, 1964 incorporated meanings from the Income-tax Act, the definition of "company" was taken from that Act, and a declaration made under the earlier Income-tax regime continued to operate through the saving provision; the Act was therefore held applicable to the assessee for the relevant assessment years. The amounts shown as retained earnings and unremitted foreign income in the balance-sheet were treated as reserves for capital computation, because the same issue had already been decided between the parties on identical facts and no ground was shown to depart from that view. Both reference questions were answered against the assessee and in favour of the Revenue.

---

---

Issues: (i) whether the Companies (Profits) Surtax Act, 1964 applied to the assessee for the assessment years 1967-68 to 1972-73; (ii) whether the amounts shown as retained earnings and unremitted foreign income in the balance-sheet were reserves for computation of capital.

Issue (i): whether the Companies (Profits) Surtax Act, 1964 applied to the assessee for the assessment years 1967-68 to 1972-73.

Analysis: The Act contained a provision adopting the meanings assigned in the Income-tax Act for words and expressions not separately defined. The expression "company" was therefore to receive the meaning given in the Income-tax Act. A declaration treating the assessee as a company under the earlier Income-tax Act continued to operate after repeal by virtue of the saving provision. The argument based on Bengal Immunity did not assist the assessee because the statutory scheme itself incorporated the Income-tax Act definition for the surtax law.

Conclusion: The question was answered in the affirmative and the Act was held applicable to the assessee for the relevant assessment years, against the assessee.

Issue (ii): whether the amounts shown as retained earnings and unremitted foreign income in the balance-sheet were reserves for computation of capital.

Analysis: This question had already been decided in an earlier reference between the same parties on identical facts. The present reference was covered by that decision, and no fresh basis was shown to depart from it. The amounts in question were treated as reserves for capital computation under the surtax law.

Conclusion: The question was answered in the affirmative, in favour of the Revenue.

Final Conclusion: Both reference questions were decided against the assessee and in favour of the Revenue, leaving no order as to costs.

Ratio Decidendi: Where a surtax statute adopts definitions from the Income-tax Act, the incorporated definition applies for surtax purposes, and a declaration made under the earlier Income-tax regime continues to operate if preserved by the saving provision.

---