1989 (9) TMI 60

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.... of the accounting year and declared and paid in the next year should not be excluded from the general reserve in computing the capital ? (2) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the general reserve should not be reduced by the sum of Rs. 28,24,000 being the value of bonus shares issued after the first day of the previous year, even though the capital had been increased proportionately in view of rule 3 of the Second Schedule ?" According to Dr. Balasubramanian, learned counsel for the Department, the first question is covered by the Supreme Court decision in the case of Vazir Sultan Tobacco Co. Ltd. v. CIT [1981] 132 ITR 559 and this question must be answered in the negati....

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....ding the amount of Rs. 14,46,000 out of the general reserve for the year. The Supreme Court decision in Vazir Sultan's case [1981] 132 ITR 559 has, of course, no application in the facts of the case. The first question is, accordingly, answered in the affirmative and in favour of the assessee. As regards the second question also, Shri Irani stated that this court's judgment in Century Spinning and Manufacturing Co. Ltd.'s case[1978] 111 ITR 6 had no application to the facts of the case. The question in that case was whether the increase of capital on account of the issue of bonus shares out of the general reserve was justified and this court held that when the bonus shares are issued as fully paid up shares by capitalisation of a part of....