TaxTMI 
TaxTMI 
1994 (12) TMI 25
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.... the first day of the previous year would not in any way reduce or affect the capital base for the purpose of the Companies (Profits) Surtax Act, 1964?" At the instance of the Revenue : 2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the provision for taxation in excess of the liability finally determined is to be treated as a 'reserve' for the purpose of computing the assessee's capital in terms of the rules contained in the Second Schedule to the Companies (Profits) Surtax Act, 1964? 3. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that rule 4 of the Second Schedule to the Companies (Profits) Surtax Act, 1964, is not appl....
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....sion of the Supreme Court in the case of Second ITO v. Stumpp, Schuele and Somappa P. Ltd. [1991] 187 ITR 108. Hence, it is answered in the affirmative and in favour of the assessee. Question No. 4 is covered in favour of the Revenue by the decision of this court in the case of CIT v. Voltas Ltd. [1994] 205 ITR 569. Following the same, it is answered in the negative and in favour of the Revenue. The only controversy that survives for our consideration is the one raised by question No. 5 which is referred at the instance of the Revenue. The relevant facts pertaining to this question are as follows : The assessee is a company. The controversy relates to the assessment of the assessee under section 6(2) of the Companies (Profits) Surtax Act....
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....to us, it may be expedient to set out the relevant facts of the case to appreciate the real nature of the disputed amount of Rs. 36,84,371 standing to the credit of the share premium account in the books of the assessee. A company named "Canara Bank Limited", which was doing banking business, was amalgamated with the assessee-company. The agreement to that effect was made on July 21, 1971. As per this agreement which came into effect from October 1, 1971, after obtaining the approval of the Karnataka High Court, all the debts, liabilities, duties and obligations of the Canara Bank Limited stood transferred to the assessee-company pursuant to the provisions of section 394 of the Companies Act, 1956. Similarly, all the assets of the said com....
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....e. On appeal, the Commissioner of Income-tax (Appeals) agreed with this finding of the Income-tax Officer. On further appeal by the assessee, the Tribunal carefully considered the factual situation set out above and observed that the amount of Rs. 36,84,371 appearing in the said premium account in the books of account of assessee actually represented the accumulated profits of the Canara Bank which remained unadjusted after the allotment of the shares to the shareholders. This amount, according to the Tribunal, was a part of the capital reserve, which had to be treated as capital under the Second Schedule. The Tribunal observed that the whole confusion had arisen in this case because of the misnomer of the account as share premium account. ....