1983 (8) TMI 28

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....ax Act, 1963. These three items pertain to the assessment year 1963-64 and were: Rs. (1) Provision for taxation 27,57,781 (2) Proposed dividend 17,54,688 (3) Provision for gratuity 9,65,203 Question No.1 pertains to the amount set aside as a provision for gratuity. Question No. 2 pertains to the amount set aside for proposed dividend. Question No. 3 (as we shall designate it) referred to us at the instance of the assessee pertains to the amount set aside by the see-company as provision for taxation. These three questions are as under: " 1. Whether, on the, facts and in the circumstances of the case, the provision for gratuity of Rs. 9,65,203 constituted a reserve for the purposes of the Super Profits Tax Act, 1963 ? ....

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....s the other two questions which are properly referred to us are concerned, it has been fairly stated by Mr. Dastur appearing on behalf of the assessee that question No. 2 is concluded in favour of the Commissioner and against the assessee by the Supreme Court by its decision given in Vazir Sultan Tobacco Co. Ltd. v. CIT [1981] 132 ITR 559. It was not the case of the assessee that a higher amount was provided for than the one actually distributed subsequently as dividend and if that be so, the matter would seem to be squarely concluded against the assessee by the decision of the Supreme Court referred to above. As far as the said question in discussion, it is unnecessary to elaborate the material further. Question No. 2 is accordingly answer....

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....own and existing liability for the year in question; if, however, an ad hoc sum is appropriated without resorting to any scientific basis, such appropriation would also be a provision intended to meet a known liability, though a contingent one, for, the expression 'liability' occurring in cl. 7(1)(a) of Part III of the Sixth Schedule to the Companies Act includes any expenditure contracted for and arising under a contingent liability ; but if the sum so appropriated is shown to be in excess of the sum required to meet the estimated liability (discounted present value on a scientific basis) it is only the excess that will have to be regarded as a reserve under cl. 7(2) of Part III of the Sixth Schedule to the Companies Act, 1956." Our att....