2001 (3) TMI 11

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....nt year 1986-87 and R.A. No. 203/JP of 1994 arising out of S.T.A. No. 5/JP of 1990 relating to the assessment year 1987-88. While making the assessment under section 6(2) of the Companies (Profits) Surtax Act, 1964, the Assessing Officer held that the provision for depreciation on investments, provision for bad and doubtful debts, provision for, foreign exchange losses, provision for development fund for bank's provision, are not "reserves" for the purposes of computation of capital employed under the Companies (Profits) Surtax Act, 1964. Being aggrieved by the assessment order, the assessee filed an appeal before the Commissioner of Income-tax (Appeals) who dismissed the appeal of the assessee (annexure 2). Thereafter, the assessee file....

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....hedule VI to the Companies Act and also referred to the decisions in the cases of Vazir Sultan Tobacco Co. Ltd. v. CIT [1981] 132 ITR 559 (SC); CIT v. Laxmi Sugar and Oil Mills Ltd. [1986] 16, ITR 168 (SC); CIT v. Cynamid India Ltd. [1992] 198 ITR 323 (Bom); CIT v. Kirloskar Cummins Ltd. [1991] 192 ITR 357 (Bom) and CIT v. Century Enka Ltd. [1992] 107 CTR 14 (Cal). In the instant case, it was explained that the depreciation on investments was in respect of the securities kept by the assessee-bank and which are treated as stock-in-trade. It was also submitted that till the assessment year 1977-78, the bank had been valuing these securities at cost and if there were any profits on sales, they were shown as profits and income. From the asse....

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....ave to be treated as reserves for the purposes of the Companies (Profits) Surtax Act, 1964. Although, the word "provision" has been mentioned against them yet, they should be considered as reserves for computation of capital under the Act. Accordingly, the Tribunal allowed the appeal filed by the assessee. The Tribunal has also held that they are unable to agree with the arguments given by learned counsel for the Revenue and distinguished the judgments cited by him. Finally, the Tribunal held that the gross dividends received by the bank and not merely dividend income as computed after giving deductions under section 80M of the Income-tax Act should be taken into consideration for computation of charge able profits under the Companies (Prof....