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Rule 1 of second schedule to the Companies (Profits) Surtax Act, 1964 - Capital - Computation of - Whether tribunal right in holding that amounts shown in relevant balance sheet as "reserve for pension" and as "reserve for roofing repairs" constituted "reserves" - Held, on facts, no FACTS For the assessment year 1965-66 relevant to the accounting year ended 30-6-1964, the STO treated "reserve for pension" (Rs. 3,50,000) and "reserve for roofing repairs" (Rs. 3,00,000) as "reserves" for computing the capital for determining surtax liability. Acting under section 16, the Commissioner set aside the said assessment (with a direction to make a fresh assessment), holding that the impugned amounts represented amounts set apart for meeting the liabilities of the assessee-company and not "reserves". On appeal, the Tribunal found as under: 1. Regarding "reserve for pension" - ( i)it was initially created in the year ending 30-6-1957, with Rs. 50,000, and increased annually to Rs. 3,50,000 by 30-6-1961; and (ii) pension was payable by the assessee in respect of some employees and the relevant expenditure had regularly been debited to its profit and loss account in the years during which they were incurred as supported by auditor's report; and (iii )it was shown throughout in the balance sheet as reserve under the head "Reserves and surplus". 2. Regarding reserve for roofing repairs - ( i)it was created prior to 1957, in the year ending 30-6-1956, it was Rs. 1,82,000 and it increased annually to Rs. 3,00,000 by 30-6-1961; (ii) in the balance sheets for the years ending 30-6-1956, 30-6-1957 and 30-6-1958, this item was shown as "provision" for roofing and repairs under the head "Current liability and provision" but in the balance sheet for the year ending 30-6-1959 and onward, it was throughout shown as "reserve for roofing repairs" under head "Reserves and surplus"; and (iii) the expenditure incurred in respect of repairs undertaken against the guarantee had regularly been debited to profit and loss account in the years during which they were incurred, as supported by auditor's report. The Tribunal also observed that, at least for few years prior to the assessment year…

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