TaxTMI 
TaxTMI 
1982 (2) TMI 61
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....the said debentures should be included in capital under clause(iv) of rule I of the Second Schedule to the Companies (Profits) Surtax Act, 1964 ? " The assessee is a company. It carries on business in the manufacture and sale of pharmaceutical goods. It closes its accounts on 31st March. Its surtax assessment for the assessment year 1965-66 covered the previous year ended 31st March, 1965. On 24th August, 1962, the assessee-company issued in favour of the Bank of Baroda without any payment having been made by it, 6 1/2% first mortgage debentures of the value of Rs. 20 lakhs and offered the same as collateral security against cash credit arrangements with the State Bank for financing its capital project of penicillin division. The dispute....
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....turn for the assessment year 1965-66, on 30th September, 1965, the assessee-company had not included the mortgage debentures of Rs. 20 lakhs in its computation of capital. However, in a revised return this sum was included as a permissible deduction under cl. (iv) of r. 1 of Sch. II to the C.(P.)S.T Act, 1964. In the course of hearing before the ITO. who made the surtax assessment for this year the assessee abandoned its claim under cl. (v) of Tula I of Sch. II and pressed an alternative claim under cl. (iv) of rule I of the same Schedule. The ITO held that the loan taken from the Bank of Baroda did not satisfy the conditions laid down in either cl. (iv) or (v) of r. 1 of Sch. II and he rejected the assessee's claim. An appeal was preferred....
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....ave to be held that all the conditions required under that clause and its proviso had also been fulfilled. On the other hand, on behalf of the revenue, it was submitted that the assessee having abandoned its claim under cl. (iv) of r. 1 of Sch. II at the assessment stage it should not be allowed to agitate this claim in appeal before the Tribunal. It was further urged that the loan was not one which was originally granted for a period of 7 years, though it might have actually been allowed for such a period and hence the claim would have to be rejected in terms of the proviso to cl. (v). The Tribunal held, inter alia, as follows: "We find that the assessee's case is fully covered by cl. (iv) of rule of the Second Schedule. In our view, al....
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....that by the issue of bonus shares in exchange for the capital reserve of the company there was no augmentation. There was no extra amount of money available to the company and, as such, such amount raised by the issue of bonus shares could not be included in the computation of capital. The Bombay High Court emphasised that what happened in such a case was that a part of the sum standing to the credit of one of the sub-items to be included in the computation of capital was during the previous year transferred to another item to be included in the computation of capital under rule 1. Therefore, when bonus shares were issued as fully paid-up shares by the capitalisation of a part of the amount standing to the credit of the general reserves, th....
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....he head of the Debenture Account in the ledger. The debentures require registration in the ordinary way. No interest is payable on such debentures; the interest on the bank loan or overdraft is paid in the usual way, and the bank will only resort to the debentures if it becomes necessary to protect their security, e.g., in a liquidation or when a receiver is appointed. The word 'secured' should appear after any liability appearing on the balance-sheet so secured." Similarly, reference was made to the observations appearing in Accountancy by William Pickles, 4th edn., p. 2394, where debenture was defined as a document acknowledging a loan to a company and is generally executed under the seal of the company usually but not necessarily c....