1978 (12) TMI 32

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....d submitted that it should be included in the computation of the capital of the assessee under r. 1(iii) of the Second Schedule to the said Act. The ITO held that this amount represented only a surplus in the profit and loss account and was not a reserve within the meaning of the said Act. Being aggrieved, the assessee preferred an appeal. The AAC rejected the contentions of the assessee on the ground that the said amount did not represent any reserve but was only a provision for the anticipated liabilities in connection with the declaration of dividends. The assessee appealed further to the Income-tax Appellate Tribunal. The Tribunal found that a reserve of the said amount of Rs. 2,97,277 had been created for the purpose of declaration o....

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....it to be incorporated in the statement. At the hearing Mr. Ajit Sengupta, learned counsel for the revenue, invited us to look into the balance-sheet of the assessee for the relevant assessment year. He submitted that on a consideration of the balance-sheet it would appear that the amount in dispute could not be a reserve but was only a provision for a contingent liability inasmuch as dividend to the extent of the said amount was declared in the very same accounting year and was in fact paid and distributed as dividend. Mr. Sengupta contended further that the item, though described as dividend reserve, was nothing but proposed dividend which was in fact proposed and declared during the year in question. He cited a decision of the Bombay Hig....