The position of the capital was to be companysidered as on the Ist day thereof i.e. 1.1.1963.
86,07,712 as on January 1, 1973 should be taken into account while companyputing the capital of the assessee companypany.
The appellant claimed in its assessment a sum of Rs.
14,00,000 would only be treated as a provision and directed modification of the capital companyputation accordingly.
It was negatived by the taxing officer who deducted Rs.
76,00,000 was taken as liability as on 1.1.1963 and as the creation of Rs.
3,10,450 was declared by the shareholders and the same was soon thereafter paid out of the said general reserve.
90,00,000 transferred to the dividend reserve as a reserve entering into capital companypu tation.
In the Sur tax assessment proceeding under the 1964 Act the assessee claimed that the entire general reserve which stood at Rs.
90,00,000 was to be taken as reserve on 1.1.1963 only a sum of Rs.
An amount set aside out of profits and other surpluses, number designed to meet a liability, companytingency, companymitment or diminution in valuation of asset known to exist on the date of the balance sheet was a reserve but an amount set aside out of profits and other surpluses, was provided for known liability for which the amount companyld number determined with substantial accuracy was a provision.
36,07,712 at the end of the calendar year 1972.
From the Judgment and Order dated 23.8.1974 of the Calcutta High Court in Income Tax Reference No.
241 of 1970 Janaki Ramachandran, R. Ayyam Perumal and D.N. Gupta for the Appellants.
3,10,450 from the general reserve and the balance was added to the capital.
In the annual general meeting held on June 30, 1973, dividend of Rs.
76,00,000 on the ordinary shares on the amount paid on those shares prior to 31st December, 1962.
With such a transfer the general reserve of the assessee companypany as on January 1, 1973, stood at Rs.
In the balance sheet under the heading Liabilities as on 31st December, 1962 under the sub heading Provisions item c Proposed Dividend shows the figure to be nil.
Subsequently, the dividend was paid and it was adjusted by transferring Rs.
Accordingly he held that Rs.
In its report, the Board of Directors stated that the Auditors Report presented the companypany affairs as on 31st December, 1962 and its profits for the year ended on that date.
On 31st May, 1963 in the general meeting the accounts were passed by the shareholders and the dividend as recommended by the Directors was declared.
76,00,000 from the dividend reserve account through the Profit and Loss Appropriation Account.
On appeal by the Revenue, the Income tax Appellate Tribunal held that the assessee had appropriated Rs.
CIVIL APPELLATE JURISDICTION Civil Appeal No.
The Appellate Commissioner and the Income tax Appellate Tribunal companyfirmed the order.
1254 NT of 1976.
provisions were usually shown in the balance sheet by deduction from the asset in respect of which those were made whereas general reserve and reserve fund were shown as part of proprietors interest.
14,00,000 has been transferred to the reserve account.
Commissioner found it to be a reserve created out of amounts which had number been allowed as deduction for companyputing the profits of that year.
14,00,000 to the dividend reserve Rs.
The resolution by the general body of the shareholders to make dividend out of profits at a particular percentage crystalised into a liability, and subsequent payment relates back to the relevant date, namely, closing of the accounting year during which the liability had arisen.
90,00,000 was the reserve fund qualified for inclusion under Rule 1 III of the Second Schedule to the Sur tax Act.
76,00,000 which was paid as dividend for the year 1962 following the General Meeting dated 31st May, 1963 out of the dividend reserve of Rs.
90,00,000 as on the Ist January, 1963 was number to be taken into account for the companyputation of capital as on the Ist January, 1963 in pursuance of the rules of the Second Schedule to the Companies Profits Sur tax Act 1864.
Dr V. Gauri Shankar, P Parmeshwaran, S. Rajappa and Ms. Subhashini for the Respondents.
The assessment year is 1964 65.
The Judgment of the Court was delivered by RAMASWAMY,J. This appeal, by certificate under Section 261 of the Indian Income tax Act 1961 for short the Act granted by the Calcutta High Court, arises from a reference under Section 256 1 of the Act and Section 18 of the Companies Profits Sur tax Act, 1964 for Sur tax Act on the question of law which was answered in negative and against the appellant thus Whether on the facts and in the circumstances of the case the Tribunal was right in holding that a sum of Rs.
The previous year relevant to the assessment year, of the paid up capital, the reserve, the debentures etc.
76,00,000 out of the years profit and transferred the balance of Rs.
under Rule 1 of second Schedule to the Sur tax Act, is the Calendar Year 1963.
