Law:

Section:

Second Schedule to the Companies (Profits) Surtax Act, 1964 - Capital - Computation of - Whether in terms of Second Schedule to Surtax Act, amount of deduction allowed under section 80J of the Income-tax Act, 1961 as well as debenture redemption reserve appearing in assessee's books and not invested in any shares or securities, should not be excluded in computing capital base of assessee for purposes of surtax -Held, yes Facts The assessee-company created debenture redemption reserve out of appropriation from profits and not by way of a charge on the revenue and the fund had been retained to form part of the capital employed in the business, i.e., it had not been invested in securities or otherwise so as to take it out of the business. None of the said debentures became redeemable during the relevant accounting period and the liability to redeem the debentures was a future liability. Those debentures had been separately shown in the balance sheet as a liability. In computing the capital of the assessee for the assessment year 1974-75, the ITO excluded the amount of deduction allowed under section 80J of the Income-tax Act, 1961, as also the amount representing debenture redemption reserve appearing in the balance sheet of the assessee. On appeal, the AAC held that as the debenture redemption reserve had not been invested as was required to create a sinking fund, the same did not constitute a sinking fund, and, therefore, the same should not be excluded in computing the assessee's capital base for the purpose of surtax. He also held that the ITO was not justified in reducing the capital base on the ground of deduction allowed to the assessee under section 80J. On the revenue's appeal, the Tribunal confirmed the AAC's findings. On reference : Held In view of the decision of this Court in CIT v. Schrader Scovill Duncan Ltd. [1981] 132 ITR 822, in the present case, the Tribunal was right in holding that the capital base could not be reduced proportionately with reference to the deductions allowed under section 80J, under rule 4 of the Second Schedule. The debenture redemption fund, in the instant case, fulfilled the tests of a reserve. Further, the debenture not…

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