TaxTMI 
TaxTMI 
1977 (8) TMI 40
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....e case, the Tribunal was justified in holding that forfeited dividend of Rs. 3,18,148, provision for taxation of Rs. 44,23,892 and proposed dividend of Rs. 48,24,530 were not reserves for purposes of computation of capital of the assessee-company within the meaning of the Second Schedule to the Super Profits Tax Act, 1963 ?" The facts found by the Tribunal including those which are matters of record may shortly be stated as follows : In the assessment year in question it was claimed by the assessee that forfeited dividend of the amount of Rs. 3,18,143, provision for taxation of the amount of Rs. 44,23,892 and proposed dividend of Rs. 48,24,530 should be treated as reserve within the meaning of the Second Schedule to the Super Profits Tax....
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....assessee, has fairly submitted that the question in respect of "proposed dividend" and "provisions for taxation" was covered by an unreported decision of this court in Income-tax Reference No. 262 of 1969, in this case of Braithwaite & Co. (India) Ltd. v. Commissioner of Income-tax-Since reported in [1978] 111 ITR 729 (Cal). Mr. Bajoria, however, contended that a contrary view has been taken by the Gujarat High Court in a subsequent decision in the case of Commissioner of Income-tax v. Mafatlal Chandulal & Co. Ltd. [1971] 107 ITR 489 (Guj), where it has been held that amounts set apart on account of proposed dividend should be included in computing the capital of a company for the purpose of the Super Profits Tax Act, 1963, and should not b....
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....eas general reserves and reserve funds are shown as part of the proprietor's interest (See Spicer and Pegler's Book-keeping and Accounts, 15th edition, page 42). An amount set aside out of profits and other surplus, not designed to meet a liability, contingency, commitment or diminution in value of assets known to exist at the date of the balance-sheet is a reserve but an amount set aside out of profits and other surpluses to provide for any known liability of which the amount cannot be determined with substantial accuracy is a provision (See William Pickles' Accountancy, second edition, page 192 ; Part III, clause 7, Schedule VI to the Companies Act, 1956, which defines provision and reserve). Mr. Bajoria contended that in the instant c....
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.... debit the account. On such facts the Appellate Assistant Commissioner held that this fund could not be treated as a reserve. The Tribunal also found that this "forfeited money reserve" arose because unclaimed dividends and other amounts were being transferred to this account. The High Court accepted the above findings of fact and held that the unclaimed dividends represented an existing liability of the assessee to its shareholders, as such unclaimed dividend was payable whenever a shareholder puts forward his claim from the "forfeited monies account". Accordingly, it was held that the "forfeited monies account" was a provision and not a reserve. Mr. Sengupta has cited certain passages from authoritative text books on English company la....
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....be treated as a reserve. On the authority of a decision of the Bombay High Court in Commissioner of Income-tax v. Tata Sons Private Ltd. [1974] 97 ITR 128, Mr. Sengupta invited this court to follow the decision of the Allahabad High Court in the case of British India Corporation (P.) Ltd. [1973] 92 ITR 38 and hold that the "forfeited dividend fund" was a provision. The Bombay High Court observed as follows : "We must accept the view taken by another High Court on the interpretation of the section of a statute which is an all India statute." We have carefully considered the respective submissions of the parties and it appears to us that the following have been found as facts : (a) The sum of Rs. 3,18,143 had originally been decla....