1991 (3) TMI 98

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....is departmental reference relating to the assessee's surtax assessment for the assessment year 1970-71, the Tribunal has referred to this court the following two questions of law under section 256(1) of the Income-tax Act, 1961, as applied to surtax by section 18 of the Companies (Profits) Surtax Act, 1964 : " 1. Whether, on the facts and in the circumstances of the case, the Tribunal was right....

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....e and in favour of the assessee. This question is so answered. As regards the first question, however, while Dr. Balasubramanian, learned counsel for the Revenue, states that this question is also covered by the Supreme Court decision in the case of Vazir Sultan Tobacco Co. Ltd. v. CIT [1981] 132 ITR 559, Mr. Dalvi, learned counsel for the assessee, contends that it is not so. In this context, ....

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....he Surtax Act, it was stated, provides for reduction of capital by taking into account such liabilities which are not provided for fully or partly. This rule was introduced from April 1, 1975. The effect of the insertion of this rule with effect from April 1, 1975, is that, prior to the assessment year for the assessment year 1974-75 and earlier, if an assessee had not made any provision or create....

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....pted. The reason is that, in tax matters, what is material is what has been done and not what could have been done. In the case before us, it is a fact that the assessee had set apart an amount to the credit of the retiring gratuity reserve. In that year, it was admittedly taken to be a provision and not as a reserve. The mere fact that it has been subsequently transferred to the general reserve c....