Commissioner of Income Tax vs Indian Potash Ltd.

Mr. Aravindh Pandian undertakes to file vakalat for the respondent-assessee.

At the instance of the Department, the Tribunal referred the following question for the opinion of this court u/s 18 of the Companies (Profits)

Surtax Act, 1964, read with section 256(1) of the Income Tax Act, 1961 :

Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the dividends declared subsequent to

the first day of the accounting year should not be reduced from the capital base for levy of surtax ?

The question relates to the assessment year 1973-74, the relative previous year ending on March 31, 1973. In computing the capital base as on

the first day of the previous year under the Second Schedule to the Surtax Act, the Income Tax Officer had reduced the sum of general reserve by

the sum of Rs. 3,25,200 being the dividend paid during the subsequent year out of the general reserve. A similar question came up for

consideration before the Supreme Court in Indian Tube Co. P. Ltd. Vs. Commissioner of Income Tax, , wherein the Supreme Court held that

though the general body of the shareholders resolved and appropriated the sum of Rs. 76 lakhs towards dividend from the reserve of Rs. 90 lakhs

on May 31, 1963, the appropriation related back to the calendar year 1962 to which it related and, as on January 1, 1963, the sum of Rs. 76

lakhs was a provision and only Rs. 14 lakhs could be treated as a reserve in the computation of capital for the purpose of surtax. Inasmuch as the

order passed by the Tribunal is not in conformity with the judgment of the Supreme Court cited above, we answer the question in the negative and

in favour of the Department. No costs.