Law:

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Second Schedule of the Companies (Profits) Surtax Act, 1964 - Capital - Computation of - Assessment year 1972-73 - Whether Tribunal was right in holding that entire sum of Rs. 1,71,70,000 styled as general reserve was includible in computation of capital of assessee-company - Held, no FACTS The Tribunal held that the entire sum of Rs. 1,71,70,000 styled as general reserve was includible in the computation of the capital of the assessee-company under rule 1 of the Second Schedule to the Act. On reference : HELD The question referred to the High Court apparently suggested that the dispute was not about the inclusion or exclusion of the entire sum of Rs. 1,71,70,000 but the dispute was only with regard to the sum of Rs. 26,00,000. In other words, there was no dispute between the parties to the extent of Rs. 1,45,70,000. The amount standing to the credit of general reserve is to be included as capital for the purpose of computing chargeable profits under the Act. In view of the Supreme Court's decision in the case of Vazir Sultan Tobacco Co. Ltd. v. CIT [1981] 132 ITR 559 this amount of Rs. 26,00,000 could not now be included in the capital computation. Therefore, the entire sum of Rs. 1,71,70,000 in question was not includible in the computation of the capital of the assessee and only an amount of Rs. 1,45,70,000 was to be included in the computation of capital. CASE REVIEW Vazir Sultan Tobacco Co. Ltd. v. CIT [1981] 132 ITR 559 (SC) and CIT v. Golden Tobacco Co. Ltd.[1977] 108 ITR 453 (Bom.) followed and relied upon. EDITOR'S NOTE The High Court following its own decision in the assessee's own case in CIT v. Golden Tobacco Co. Ltd. [1981] 108 ITR 45 also held that the Tribunal was justified in directing the inclusion of the sum of Rs. 40,732 being the. reserve for doubtful debts, for the purpose of calculating the capital for the assessment year 1972-73. CASES REFERRED TO Vazir Sultan Tobacco Co. Ltd. v . CIT [1981] 132 ITR 559 (SC) and CIT v. Golden Tobacco Co. Ltd. [1977] 108 ITR 453 (Bom.). G.S. Jetly, Pradeep G. Jetly and K.C. Sidhwa for the Applicant. S.J. Mehta, I.M. Munim, V.H. Patil and V.P. Mehta for the Respondent. JUDGMENT Sugla, J. - In this…

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