1986 (7) TMI 86

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....,000, respectively, to its profit and loss accounts of the relevant previous years, respectively. The amounts were debited on the ground that they represented the assessee's liability of the relevant years for the additional cane price payable to cane growers in terms of a price-linking formula to be fixed by the Competent Authority under the Sugarcane Price Control Order, 1955. Accordingly, an item of Rs. 8,16,000 being the sum of the two amounts was shown in the balance-sheet of the assessee as on September 30, 1962. The item was shown under the head " Current liabilities and provisions ". In assessment proceedings under the Super Profits Tax Act, 1963, for the assessment year 1963-64, the Income-tax Officer did not include the amount ....

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....Whether, on the facts and in the circumstances of the case, the provision for additional cane price amounting to Rs. 8,16,000 was rightly treated as a 'reserve' forming part of the assessee's capital for the purposes of assessment to super profits tax for the year under consideration ?" The High Court answered the question in the affirmative by its judgment dated April 26, 1973. We are of opinion that the High Court is right. Section 4 of the Super Profits Tax Act, 1963, levies super profits tax on every company in respect of so much of its chargeable profits of the previous year as exceed the standard deduction. The expression " standard deduction " is defined by clause (9) of section 2 of the Act to mean an amount equal to six per c....

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....ons of profits, the assets by which they are represented being retained to form part of the capital employed in the business. Provisions are usually shown in the balance-sheet by way of deductions from the assets in respect of which they are made, whereas general reserves and reserve funds are shown as part of the proprietor's interest. (See Spicer and Pegler's Book-keeping and Accounts, 15th Edn., p. 42)." Regard was had by the court to the relevant provisions of the Companies Act, 1956, including the form set out in Part 1, Schedule VI thereof, where both expressions " Reserves and surpluses " and " Current liabilities and provisions " have been used. It is not necessary, we think, to embark upon a detailed discussion of the distinctio....