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JUDGMENT Chagla, CJ.-This reference raises a question under the Business Profits Tax Act, The assessee company is the Century Spinning and Manufacturing Company Ltd., and its balance sheet for the year 1945 shows that it made a profit of Rs. 90,44,677. The profit was appropriated by a certain amount being paid for dividend and certain amounts being set aside for depreciation and other funds. Under this heading amounts were set aside for machinery, for buildings, for provision for taxation and for compulsory excess profits tax deposit ; and a sum of Rs. 5,08,637 was carried over as balance to the balance sheet. Now the question that falls to be determined is whether this sum of Rs. 5,08,637 can be called a reserve for the purpose of Rule 2(1) in Schedule II of the Business Profits Tax Act. That Rule provides that "Where a company is one to which clause (a) of Rule 3 of Schedule I applies, its capital shall be the sum of the amounts of its paid up share capital and of its reserves in so far as they have not been allowed in computing the profits of the company for the purposes of the Indian Income-tax Act, 1922". Therefore in order to determine the capital of the company for the purposes of this Act you have got to take the paid-up share capital of the company, then you have to add to it the reserves and you have to add only those reserves which have been subjected to taxation. The expression used in this rule is rather curious because we do not find the expression "reserves" used in the Indian Income-tax Act at all. An assessee may build up any reserves that he likes, but it does not follow that those reserves escape taxation. The only provision made in the Income-tax Act is under Section 10(2)(vi) which permits an assessee doing business a certain amount for depreciation which escapes taxation, or is considered to be an allowable deduction. Depreciation is allowed according to the rules framed by the Department. Therefore, we cannot give to the expression "reserves" used in this rule any technical meaning which has been given to it in any taxing statute, but we must give to it its plain natural meaning. Now what is urged by the Advocate-General is that this sum…

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