Law:

Section:

I. Schedule II of the Super Profits Tax Act, 1963 – Capital – Computation of – Assessment year 1963-64 – Whether provision for taxation should not be included in computing capital for purpose of levy of super profits tax – Held, yes HELD In view of the decision of the same High Court in Mysore Electrical Industries Ltd. v. Commissioner of Super Profits Tax (ITRC No. 11 of 1967 decided on 28-10-1969), it was held that provision for taxation was not to be included in computing capital for purpose of levy of supper profits tax. II. Schedule II of the Super Profits Tax Act, 1963 – Capital – Computation of – Assessment year 1963-64 – Whether amount advanced by bank to assessee against bills drawn by assessee on its customers for supplies was money borrowed and outstanding for purpose of computation of capital under Act – Held, yes FACTS The assessee company claimed that the amount advanced by the bank to the assessee against bills drawn by the assessee on its customers for supplies represented ‘money borrowed' and should be included in computing its capital for purpose of levy of super profits tax. The full amount of the bill was given credit to in the account of the assessee with the bank and no sum towards what amounted to discount was charged. Interest on the amount advanced was charged from the date of the credit till the date of realisation of the bill. The ITO held that the amount represented a liability on the bills discounted and was only a contingent liability and could not constitute moneys borrowed and outstanding. The AAC affirmed the view of the ITO. The Tribunal also dismissed the assessee's appeal. On reference : HELD The question was whether the transaction under which the bills in question were indorsed by the assessee in favour of its bankers amounted to a pledge of the bills as security for the loans advanced by the bank on their security or constituted absolute transfer of the bills, equivalent to discount. A dividing line between the two ideas is sometimes difficult to draw. The presumption in all cases of negotiation is in favour of the absolute transfer, and this presumption his heightened when the transfer is by endorsement. The question is,…

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