Law:

Section:

Rule 1 of the second schedule to the Super Profits-tax Act, 1963 - Capital - Computation of - Whether provisions made by assessee-company towards customs duty provisionally assessed by customs authorities but disputed by assessee, and towards taxation could be treated as 'reserve' - Held, on facts, no -Assessee-company acquired right to use certain trade mark for 20 years on lump sum payment - It treated trade marks as its fixed assets and set apart one-twentieth of cost thereof as depreciation in each year which went to reduce value of fixed assets in balance sheet - Whether aggregate amount so set apart as depreciation could be treated as reserve - Held, on facts, no Section 1 of the Super Profits-tax Act, 1963 - Rule of interpretation - Whether, having regard to the object of levy of super profits tax, words and phrases in the super profits tax act, 1963 should be construed in their commercial sense and not according to their dictionary meaning - Held, yes Facts The assessee-company disputed the levy of customs duty in respect of certain imported goods and did not pay the duties levied on it by the customs authorities on provisional assessment. However, it set apart certain lump sums from year to year as 'provision for additional custom duty' and showed them under the head 'Provisions' in its balance sheet. It claimed that the aggregate amounts so set apart would qualify as 'reserve', if that term was given its widest connotation in accordance with its general dictionary meaning and should, therefore, be taken into account for computation of its capital under rule 1 of the Second Schedule. It also claimed the provision for taxation as a 'reserve'. The assessee had also acquired user rights of certain trade marks for 20 years on lump sum payment, which was shown as part of the fixed assets of the company. Every year one-twentieth of this amount was set aside as provision for depreciation in respect of trade marks. The aggregate amount so set aside was also claimed as a reserve by the assessee for computing its capital. All these claims Were rejected by the ITO, the AAC and the Tribunal. On reference : Held The contention that the term 'reserve' should be…

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