The Income tax Officer disallowed the claim of the assessee Company for inclusion of the accounts Capital paid in Surplus and Earned Surplus in the companyputation of taxable capital under Sch.
II r. 2 1 of the Business Profits Tax Act and the Appellate 37 1 Assistant Commissioner agreed with him.
Appeal by special leave from the judgment and order dated January 29, 1962 of the Calcutta High Court in Income tax Reference No.
A. Palkhiwala, Ramachandran, J. B. Dadachanji, O. C. Mathur and Ravinder Narain, for the respondent.
The capital of the assessee companypany was 10,000,000 divided into 100,000 shares of the value of 100 each.
V. Viswanatha Sastri, N. D. Karkhanis, R. H. Dhebar and N. Sachthey, for the appellant.
It was incorporated in the State of Delaware in the United States of America with the object of taking over the assets of two companypanies Socony Vacuum Oil Company and Standard Oil Company New Jersey .
By adjustment entries the Capital paid in Surplus account was reduced to 117,561,317 and throughout the period of three years to which these appeals relate, in the balance sheets of the assessee companypany, the Capital paid in Surplus stood unchanged at that figure.
At the end of 1945, the balance of Earned Surplus was 29,557,597 and by the end of 1948 the account stood at 73,766,592.
Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that the sum of 29,000,000 odd, 43,000,000 odd, 56,000,000 odd and 73,000,000 odd for the respective years appearing in the Balance Sheets of the assessee as, Earned Surplus would be treated as a reserve within the meaning of Sub Rule 1 of Rule 2 of the Schedule 11 of the Business Profits Tax Act.
CIVIL APPELLATE JURISDICTION Civil Appeal No.
The Judgment of the Court was delivered by Shah, J. At the instance of the Commissioner of Income tax Central Calcutta, the Income tax Appellate Tribunal referred the following questions for the opinion of the High Court of Calcutta under s. 19 of the Business Profits Act 21 of 1947 Whether on the facts found the Tribunal was right in holding that the sum of 117,000,000 appearing in the Balance Sheet of the assessee Company under the head Capital paid in Surplus and companystituting the excess of the book value of the assets over the face value of the shares represented premium realised from the issue of the s hares as companytemplated by Rule 3 of Schedule II of the Business Profits Tax, Act, 1947.
The assessee companypany entered in its books of account the book value of the assets taken over from the transferor companypanies.
The assessee Company is a number resident.
1.8 of 1955.
The Commissioner of Income tax has appealed to this Court with special leave.,
The remaining ten shares were divided equally between the two transferor companypanies for cash at par value.
The net profits earned by the Company year after year, subject to certain appropriations were shown in the balance sheet under the caption Earned Surplus or Earnings reinvested.
The serial bonds issued to the Socony Vacuum Oil Company were later redeemed.
The High Court recorded answers in the affirmative on all the questions.
268 of 1964.
