This Act, as is we I known, was designed to assess large profits made by companypanies carrying on business during the boom years of the war.
Thereupon the Tribunal formulated the two questions aforementioned for reference to the High Court under section 66 1 of the Act, read with section 19 of the Business Profits Tax Act of 1947.
By the resolution of the shareholders on the 3rd April, 1946, the amount was shortly afterwards distributed as dividend.
Hence the two appeals.
The Income tax Officer rejected the companytention holding that A reserve represents profits set apart for some specific or general purpose and therefore profits which have number been so set apart cannot be treated as forming part of reserves for the purpose of inclusion in the capital.
Appeals from the Judgment and Order dated the 29th day of March, 1951, of the High Court of Judicature at Bombay Chagla C.J. and Tendolkar J. in its Original Civil Jurisdiction in Income tax Reference No.
5,08,637 was carried to the balance sheet.
157 and 158 of 1952.
This order was companyfirmed on appeal by the Appellate Assistant Commissioner but was set aside by the Income tax Appellate Tribunal.
The Business Profits Tax Act No.
N. Joshi for the Commissioner of Income tax.
J. Kolah for the Century Spinning and Manufacturing Co. Ltd. 1953.
The Judgment of the Court was delivered by GHULAM HASAN J. These two companynected appeals, one by the Commissioner of Income tax, Bombay, and the other by the Century Spinning Manufacturing Co. Ltd., arise out of the judgment and order of the Bombay High Court delivered on a reference made by the Income tax Appellate Tribunal, Bombay.
Civil Appeals Nos.
5,08,637 is a part of the reserves of the assessee companypany as on 1st April, 1946, within the meaning of rule 2 1 of the rules in Schedule II to the Business Profits, Tax Act, and Whether the profits of them assessee companypany from 1st January to 1st April, 1946, should be included in the said reserves as on 1st April, 1946.
As already stated the High Court decided the first question in favour of the assessee and the second in favour of the department.
XXI of 1947 came into force on the 11th April, 1947, having taken the place of the Excess Profits Tax Act which was repealed on the 30th March, 1946.
The profits according to the profit and loss account were Rs.
The two questions of law referred by the Tribunal were as follows Whether the amount of Rs.
Two companytentions were raised on behalf of the assessee before the Income tax Officer, the first being whether the aforesaid sum companyld be called a reserve within the meaning of rule 2 1 of the Rules in Schedule II to the Business Profits Tax Act and whether it should be included in its reserves while determining the capital on the 1st April, 1946 the second that the proportionate profits of the assessee for three months, between the 1st January, 1946, and the 1st April, 1946, should also be included in the said reserves.
CIVIL APPELLATE JURISDICTION .
October 8.
The accounting year followed by the assessee is the calendar year and the chargeable accounting period is the 1st of April, 1946, to the 31st of December, 1946, in respect of the profits ending with 31st December, 1945.
The High Court answered the first question in the affirmative and the second in the negative.
27 of 1950.
