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Rule 1 of second schedule to the super Profits tax Act, 1963 and rule 1 of second schedule to the companies (profits) surtax act, 1964-Capital-Computation of-Assessee-company had shown in its balance sheet identical amounts for three consecutive assessment years as gratuity reserve-Whether impugned sum would constitute a reserve and includible in capital computation-Held, yes Facts For the assessment years 1963-64, 1964-65 and 1965-66, the assessee-company had shown an identical amount of Rs. 1,70,000 in its respective balance sheets as "gratuity reserve". The question for consideration was whether the same would be a reserve and includible in computing capital base. Held The fact that an identical amount was carried forward in all three consecutive assessment years would indicate that this was just setting apart in an ad hoc manner and without any correlation with the actual or estimated liability for payment of gratuity. The impugned sum will, therefore, constitute a reserve and was includible in the capital computation. Case review CIT v. Forbes, Forbes Campbell & Co. Ltd. [1977] 107 ITR 38 (Bom.) followed. Cases referred to CIT v. Forbes Forbes Campbell & Co. Ltd. [1977] 107 ITR 38 (Bom.) and CIT v. Bombay Tyres International Ltd. [1983]141 ITR 710 . JUDGMENT Desai J.-In our opinion, both these references can be disposed of by a common order. The assessee in both the matters, who is the respondent, is Asian Paints (India) Pvt. Ltd. In Income-tax Reference No. 97 of 1972, we are concerned with the computation of super profits tax for the assessment year 1963-64. In Income-tax Reference No. 102 of 1972, we are concerned with the computation of surtax for the assessment years 1964-65 and 1965-66. In both the references the question which is required to be considered is whether the identical amount of Rs. 1,70,000 shown in the balance-sheet of the company as "gratuity reserve" in all the three assessment years under consideration would be a reserve and hence includible in the computation of capital or not. The questions referred to us may now be set out. In Income-tax Reference No. 97 of 1972, the following question stands referred to us : "Whether, on…

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