In the circumstances, the Appellate Tribunal held that the liability for which the provision was made was at the best unreal and imagined or the mere possibility of a liability.
Dismissing the assessees appeal, the Appellate Assistant Commissioner affirmed the view taken by the Income tax Officer.
In assessment proceedings under the Super Profits Tax Act, 1963 for the assessment year 1963 64, the Income tax Officer did number include the amount of Rs.8,16,000 in the capital companyputation of the assessee.
1613 NT of 1974 From the Judgment and Order dated 26th April, 1973 of the Allahabad High Court in Misc.
At the instance of the Revenue the Appellate Tribunal referred the case to the High Court of Allahabad for its opinion on the following question Whether on the facts and in the circumstances of the case the provision for additional cane price amounting to Rs.8,16,000 was rightly treated as a reserve forming part of the assessees capital for the purposes of assessment to Super Profits Tax for the year under companysideration?
The High Court answered the question in the affirmative by its judgment dated April 26, 1973.
The item was shown under the head Current liabilities and provisions.
CIVIL APPELLATE JURISDICTION Civil Appeal No.
Case No.
202 of 1971.
K. Mukharjee and A.K. Sengupta for the Respondent.
The amounts were debited on the ground that they represented the assessees liability of the relevant years for the additional cane price payable to cane growers in terms of a price linking formula to be fixed by the Competent Authority under the Sugarcane Price Control Order 1955.
B. Ahuja and Miss A. Subhashini for the Appellant.
For the assessment years 1961 62 and 1962 63 the assessee had debited an amount of Rs.5,40,000 and an amount of Rs.2,76,000 to its profit and loss accounts of the relevant previous years respectively.
Accordingly an item of Rs.8,16,000 being the sum of the two amounts, was shown in the Balance Sheet of the assessee as on September 30, 1962.
The Judgment of the Court was delivered by PATHAK J. This appeal by special leave is directed against the judgment of the High Court of Allahabad pronouncing on the meaning of the expression reserves in the Second Schedule to the Super Profits Tax Act, 1963.
