1996 (2) TMI 92

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.... section 256(1) of the Income-tax Act, 1961 (hereinafter referred to as " the Act ") and the following question of law has been referred by the Tribunal for answer of this court, which reads as under : "Whether, on the facts and in the circumstances of the case, the reserve of Rs. 1,07,933 created by the transfer from sales and not from profit and loss appropriation account for, the constructio....

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....f Income-tax felt that as the reserve was created out of the sales, the sales to that extent got reduced resulting in lower income being taxed, and as such he held that the order of assessment was erroneous in so far as it is prejudicial to the interests of the Revenue and, therefore, he, in exercise of his revisional power, conferred under section 263 of the Income-tax Act, enhanced the income of....

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....accordance with the provisions of the Molasses Control Order, 1961, and the Standing Order dated December 3, 1976, has been rightly treated by the Tribunal as not includible in the income of the assessee. A similar question came up before this court in the case of Keshkal Co-operative Marketing Society Ltd. v. CIT [1987] 165 ITR 437. But in that case, it was a co-operative society and the co-opera....

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....ll be deductible from the income of the assessee and not from the profit. The Tribunal, after analysing the provisions of the Molasses Control Order and decision of this court, has taken the view that the assessee is under a statutory obligation to create a reserve fund of 33 per cent. of its sales every month and such reserve has to be invested in deposits with nationalised banks and can be withd....