Commissioner of Income Tax vs Golden Tobacco Co. Ltd.

T.D. Sugla, J.—In this Departmental reference relating to the assessment of the assessee-company for the assessment year 1972-73, the Income Tax Appellate Tribunal has referred to this court u/s 256(1) of the Income Tax Act, 1961, the following two question of law which read as under :

"1. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the entire sum of Rs. 1,71,70,000 styled as general reserves was includible in the computation of the capital of the assessee-company under rule 1 of Schedule II to the Companies (Profits) Surtax Act, 1964, for the assessment year 1972-73 ?"

Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in directing the inclusion of the sum of Rs. 40,732 being the reserve for doubtful debts, for the purpose of calculating the capital base for the assessment year 1972-73 ?"

Question No. 1 apparently suggests that the dispute is not about the inclusion or exclusion of the entire sum of Rs. 1,71,70,000. The dispute is only with regard to the sum of Rs. 26,00,000. In other words, there is no dispute between the parties to the extend of Rs. 1,45,70,000. The amount standing to the credit of the general reserves is to be included as capital for the purpose of computing chargeable profits under the Surtax Act. It is common ground, in view of the Supreme Court''s decision in the case of Vazir Sultan Tobacco Co. Ltd., Hyderabad and Others Vs. Commissioner of Income Tax, Andhra Pradesh, Hyderabad, , that this amount of Rs. 26,00,000 cannot now be included in the capital computation.

The question is, therefore, answered thus :

"The Tribunal was not justified in holding that the entire sum of Rs. 1,71,000 styled as ''general reserves'' was includible in the computation of the capital of the assessee-company."

It should have held that only an amount of Rs. 1,45,70,000 was to be included in the computation of capital. The question is so answered.

As regards the second question, counsel are agreed that, in view of our court''s decision in the assessee''s own case in Commissioner of Income Tax, Bombay City-VI Vs. Golden Tobacco Co. Ltd., , the question requires to be answered in the affirmative and in favour of the assessee. The question is so answered. No order as to costs.