1988 (12) TMI 15

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....n this reference, at the instance of the Department, is : "Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the amount transferred from the general reserve to the profit and loss account for making payment of the final dividend should not be reduced from the general reserve in computing the capital of the assessee-company under the Second Schedule....

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....directors' recommendations and the final dividend was paid out of the general reserve. According to Dr. Balasubramaniam, the approval of the directors' recommendations in May, 1964, about the declaration of dividend related back to December 31, 1963. The amount representing dividend to be distributed was, therefore, a known liability and, to that extent, the general reserve should have been reduce....

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.... it was held that though the amount so set apart was not for meeting any known or existing liability, yet the said amount so set apart cannot be considered to be a reserve within the meaning of the Act for the purpose of computation of the capital of the company. It is, thus, evident that the Supreme Court's observations are in regard to a reserve created out of the profits of the year in respect ....