Bharat Sugar Mills Limited vs Commissioner of Income Tax

Sen, J.—This is a case under the Companies (Profits) Surtax Act, 1964. The question of law that has been referred is as follows:

"Whether, on the facts and in law in the circumstances of the case, and on a proper interpretation of Explanation 1 of rule 2 of the Second Schedule to the Companies (Profits) Surtax Act, 1964, the Tribunal was right in holding that the said sum of Rs. 3,50,000 being the adjustment made in respect of the excess depreciation charged in the earlier years could not be treated as part of the capital for purposes of determining the statutory deduction u/s 2(8) of the said Act?"

This very question came up for consideration before a Division Bench of this court in I. T. Reference No. 313 of 1977 in the assessee''s own case for "the assessment year 1973-74. By a judgment dated November 7, 1978, the question was answered in the affirmative and against the assessee.

The relevant assessment year in the case before us is the assessment year 1975-76. The corresponding accounting period ended on June 30, 1974. In this case, the Tribunal has merely followed its decision in the previous year. It has not given any separate reason of its own. Therefore, in view of the judgment delivered in the assessee''s own case on November 7, 1978, for the previous assessment year, the question is answered in the affirmative and against the assessee.

Mr. Bajoria, appearing on behalf of the assessee, has contended that there is another decision of this court in the case of Commissioner of Income Tax and Super Profits Tax Vs. Indian Leaf Tobacco Development Co. Ltd., , in which a seemingly contradictory view has been taken. In that case, the judgment of this court in the case of Upper Ganges Sugar Mills Ltd. Vs. Commissioner of Income Tax, Central, , was considered and distinguished on facts. Mr. Bajoria has contended that the distinction was without any difference.

It does not appear from the judgment in the case of Commissioner of Income Tax and Super Profits Tax Vs. Indian Leaf Tobacco Development Co. Ltd., that the correctness of the judgment delivered in the assessee''s own case on November 7, 1978, was doubted in any way.

Mr. Bajoria appearing for the assessee has prayed for a certificate of fitness for appeal to the Supreme Court. The question whether an amount set apart in excess of what is actually required for depreciation will automatically amount to a reserve or will continue to remain a part of mass of undistributed profits of the company is an important question of law. There is no judgment of the Supreme Court on this point. In view of the aforesaid, we grant Mr. Bajoria''s prayer for a certificate of fitness for appeal to the Supreme Court. Let a certificate of fitness for appeal to the Supreme Court be issued u/s 261 of the I. T. Act read with Section 18 of the Companies (Profits) Surtax Act, 1964.

There will be no order as to costs.

Satish Chandra, C.J.

I agree.