Commissioner of Income Tax vs HANSA AGENCIES (P) LTD.

C. S. Singhvi, J.

This is a petition u/s 256(2) of the Income Tax Act, 1961 (hereinafter referred to as "the Act"), directing the Income Tax Tribunal, Amritsar Bench, Amritsar (hereinafter referred to as "the Tribunal"), to refer the following question of law to this court for its opinion :

"Whether, on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in upholding the order of the Commissioner (Appeals) to the effect that the amount of Rs. 57,85,000 is in the nature of general reserve and is not hit by the exceptions contained in the Explanation to rule 1 of the Second Schedule ?"

A perusal of the record shows that the assessee had filed a return declaring chargeable profits as nil. The Inspecting Assistant Commissioner (Assessment), Range-I, Jalandhar, issued notice to the assessee under the Surtax Act and after considering the submissions made by its representative, he passed the order dated 29-1-1988, declaring the general reserve as exclusive surplus in the profit and loss account and not the capital gain for the purpose of statutory deductions and declined the deductions claimed by the assessee. The Commissioner (Appeals)-II, Jalandhar, allowed the appeal filed by the assessee and directed the assessing authority to amend the surtax assessment by treating Rs. 57,85,000 as part of the capital. The Tribunal upheld the order passed by the Commissioner of Income Tax (Appeals) and the reference application filed by the revenue was also dismissed.

Shri R. P. Sawhney invited our attention to the order passed by the Tribunal and submitted that the decision of the Supreme Court in Commissioner of Income Tax, Kanpur Vs. Elgin Mills Ltd., Kanpur, which has been relied upon by the Tribunal for declining reference application filed u/s 256(1) of the Act did not deal with the issue as to whether the amount is in the nature of general reserve and could be treated as part of the profit and loss account and is not hit by the exceptions contained in the Explanation to rule 1 of the Second Schedule.

After considering the submission of Shri Sawhney and having gone through the decision of the Supreme Court, we are convinced that the question sought by the revenue deserves to be determined by this court.

Hence, the petition is allowed. The Tribunal is directed to refer the abovenoted question and send the statement of case along with the records to this court.

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