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Rule 1 of Second Schedule of the Super Profits Tax Act, 1963 - Capital - Computation of - Assessment year 1963-64 - Assessee-company claimed inclusion of (1) proposed dividends, (2) provision for taxation, (3) credit balance of profit and loss account, and (4) depreciation reserve being excess of book depreciation over income-tax allowed depreciation, in computation of capital - Whether where amount was ear-marked for payment of dividend and was not treated by directors of company as a reserve, it remained a mass off undistributed profits liable to be distributed as dividend upon acceptance of recommendation by shareholders, and, as such, it was not set apart as a reserve for any purpose, liable to be treated as a reserve for purposes of rule I of Schedule II - Held, yes - Whether where provision was made for current liability, liability having already accrued when income was earned and awaited merely quantification by assessment, item representing provision for taxation could not be treated as a reserve - Held, yes - Whether where there was nothing to show that credit balance of profit and loss account was set apart by assessee to some future use, this item could not also be described as a reserve - Held, yes - Whether in absence of any evidence to show that amount described as a depreciation reserve was set apart for a future use, this item also could not be treated as a reserve - Held, yes - Whether since above four items did not represent 'reserves' they could not be included in computation of capital under Act - Held, yes Words and Phrases : Words 'reserve' occurring in Schedule II, Rule 1, to the Super Profits Tax Act, 1963. FACTS For the assessment year 1963-64, of which the relevant account year ended on 31-12-1962. In the assessment proceeding, the assessee claimed inclusion of (1) proposed dividends, (2) provision for taxation, (3) credit balance of profit and loss account, and (4) depreciation reserve being excess of book depreciation over income-tax allowed depreciation, in the computation of its capital. The ITO rejected the claim on the ground that those items did not constitute 'reserves'. On second appeal, the Tribunal held that all the four…

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