Law:

Section:

Second Schedule to the Companies (Profits) Surtax Act, 1964 - Capital - Computation of - On 3-4-1963 or earlier, assessee provided some amount towards reserve for super profits tax as on 1-4-1963 - On that date there was no Act but merely a bill which was given assent by President subsequently - Whether since there was no Act on relevant date, there was no liability on assessee, either contingent or otherwise - Held, yes - Whether amount provided towards reserve by assessee should be treated as reserve within meaning of rule 1 of second schedule and should be included in computation of capital for purpose of Act - Held, yes FACTS On 3-4-1963 or earlier, the assessee provided some amount towards reserve for super profits tax as on 1-1-1963 within the meaning of rule 1 the second schedule to the Act. The Income-tax Officer excluded the reserve for super profits tax from the computation of capital for the purpose of determining the statutory deduction from the chargeable profits of the assessee under the Act. The AAC affirmed the order of the Income-tax Officer. The Tribunal, however, held that it could not be said that on 1-1-1963 the assessee had a liability towards super profits tax though it was a different thing the Super Profits Tax Act, 1963 coming after 1-1-1963, made the profits of the calendar year 1962 taxable in a retrospective- manner. The Tribunal also held that did not convent an amount otherwise to be treated as a reserve into a provision and therefore, directed the Income-tax Officer to include the amount the said reserve in the computation of the assessee capital. On reference : HELD It could not be accepted that on the relevant date 3-4-1963, there was any known liability, whether contingent or otherwise. There was no Act at that point of time. Merely there was a bill. A bill might or might not be changed into an Act. The bill cannot be treated as a contingent liability. A bill introduced in Parliament cannot create any liability, contingent or otherwise. In the instant case, when this amount was earmarked on 3-4-1963, or a little earlier as found by the Tribunal, there was no such Act. In this view, the provision in this particular case was to…

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