1973 (5) TMI 13

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....ations had been made before declaring the dividends : Rs. Provision for tax 3,60,000 Proposed dividends 2,31,470 For the purpose of computation of capital as on January 1, 1962, the assessee claimed that the above sums as also a sum of Rs. 2,60,000 set apart for payment of advance tax for the earlier year should be taken as "other reserves" occurring in rule 1 of Schedule 2 to the Super Profits Tax Act, 1963 (hereinafter referred to as "the Act"). The Super Profits Tax Officer, however, held that the above sums were not includible in the capital as on January 1, 1962, on the ground that they did not represent "reserves" on that date. The assessee appealed to the Appellate Assistant Commissioner. He held, following the ratio of the deci....

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.....'s case, the appropriation having been made by the competent authority, the board of directors, only on May 31, 1962, the sums referred to above did not represent any reserve. In respect of the sum of Rs. 2,60,000 appropriated towards tax by the competent authority in the earlier year the Tribunal, following the decision of the Supreme Court in Kesoram Industries and Cotton Mills Ltd. v. Commissioner of Wealth-tax held that the sum represented the present liability and a provision to discharge that liability cannot be a reserve. At the instance of the assessee the. following question has been referred to this court : "Whether, on the facts and in the circumstances of the case, the two sums of Rs. 6,20,000 and Rs. 2,31,470 represented rese....

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....ilar to rule 1 of Schedule 2 of the Act and uses the words "as on the first day of the previous year" as distinguished from the words "on the first day of the previous year" used in rule 2(1) of Schedule 2 of the Business Profits Tax Act, 1947, which was considered by the Supreme Court in Centuary Spinning and Manufacturing Co.'s case, the reasoning of the Tribunal that the sum in question represented mass of undistributed profits on January 1, 1962, cannot be accepted. As already stated, the sum of Rs. 6,20,000 represents two items consisting of Rs. 2,60,000 set apart for payment of taxes in the earlier year and Rs. 3,60,000 set apart for payment of taxes in the accounting year. The sum of Rs. 2,31,470 represents the sum set apart for pay....