Excess tax provision as reserve and appellate quantification of the same claim is not a new ground.

Where a balance-sheet provision for taxation exceeds the assessee's final tax liability, the excess is to be treated as a reserve for capital computation under the surtax scheme, subject to factual determination of the overall excess, if any. The note states that the relevant test is whether a real provision existed on the relevant date and whether that provision overstated the liability. It also explains that a higher quantification of the same claim at appellate stage does not, by itself, make it a new ground; the controversy remains the same claim on excess provision over tax liability.

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Issues: (i) Whether the excess, if any, of provision for taxation over the final tax liability could be treated as a reserve for capital computation under the surtax scheme on an overall basis. (ii) Whether the assessee's claim was a wholly new ground and therefore not entertainable at the appellate stage.

Issue (i): Whether the excess, if any, of provision for taxation over the final tax liability could be treated as a reserve for capital computation under the surtax scheme on an overall basis.

Analysis: The relevant test is whether a real provision existed in the balance sheet on the relevant date and, if so, whether that provision exceeded the final tax liability. The excess of a provision made for a non-existing or overstated liability is to be treated as a reserve for capital computation. The provision for taxation was to be viewed as representing the assessee's overall tax liability, and the matter required factual determination of the overall excess, if any.

Conclusion: The issue was answered in favour of the assessee, and the matter was remanded for computation of the overall excess, if any, and treatment of the same as reserve.

Issue (ii): Whether the assessee's claim was a wholly new ground and therefore not entertainable at the appellate stage.

Analysis: The controversy before the lower authority already concerned the determination of excess provision over tax liability. A higher quantification of the same claim at the appellate stage did not convert it into an altogether new ground.

Conclusion: The objection that the claim was a new ground was rejected and the issue was decided in favour of the assessee.

Final Conclusion: The appeals succeeded in part for statistical purposes, and the assessments were set aside for fresh factual computation on the reserve question.

Ratio Decidendi: Where a balance-sheet provision for taxation is shown to be in excess of the assessee's final tax liability, the excess is to be treated as a reserve for capital computation, and a higher quantification of the same controversy on appeal does not by itself make the claim a new ground.

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