Law:

Section:

Rule 2(ii) of the second schedule to the companies (profits) surtax act, 1964-Capital-Computation of-Whether proposed dividend can be treated as "surplus" for purpose of computing capital base of company-Held, no Facts For the assessment year 1965-66 the assessee-company claimed that a certain sum set apart as proposed dividend should not be deducted from the capital base as it constituted a surplus fund within the meaning of rule 2 of the Second Schedule. The ITO, however, disallowed the claim. On appeal, the AAC allowed the claim. On further appeal, the revenue contended that the proposed dividend was not a reserve and, therefore, could not be taken into account in computing the capital base. The Tribunal observed that the proposed dividend was "surplus" even if the same did not constitute a "reserve". It, accordingly, held that the proposed dividend was a surplus and had to be deducted from the cost of investment in shares and it was only the balance which had to be deducted from the capital computation as laid down under clause (ii) of rule 2 of the Second Schedule. On reference : Held The ordinary meaning of the expression "surplus" is what remains after meeting the requirements. Therefore, where a dividend has already been proposed by the directors, the amount proposed as dividend cannot be considered to remain as surplus with the company for any length of time. Further, this view is also corroborated by the form of balance sheet in Schedule VI to the Companies Act, 1956. Accordingly, the proposed dividend could not be considered as surplus and the Tribunal was in error in considering the proposed dividend as surplus which could be said to be available for future use with the assessee-company. Case review Duncan Brothers & Co. Ltd. v. CIT [1978] 111 ITR 885 (Cal.) and Duncan Brothers & Co. Ltd. v. CIT [1981] 128 ITR 302(Cal.) distinguished. Cases referred to Duncan Bros. & Co. Ltd. v. CIT [1978] 111 ITR 885 (Cal.) and Duncan Bros. & Co. Ltd. v. CIT [1981] 128 ITR 302 (Cal.). Judgment Sabyasachi Mukharji, J.-In this reference for the assessment year 1965-66, the following question has been referred to this court: "Whether, on the facts and…

Deprecated: trim(): Passing null to parameter #1 ($string) of type string is deprecated in /home/digixyei/sldsystempk.com/view/master-layout/view_case.php on line 492