Commissioner of Income Tax vs New Great Insurance Co. of India Ltd.

Bharucha, J.—The question to be answered in this reference made at the instance of the Revenue reads thus :

"Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the sum of Rs. 2,40,000 representing gratuity reserve was includible in the computation of the capital under rule 1 of the Second Schedule of the Super Profits Tax Act, 1963 ?"

Counsel are agreed that the question has to be answered in the negative and in favour of the Revenue in view of the Supreme Court judgment in Vazir Sultan Tobacco Co. Ltd., Hyderabad and Others Vs. Commissioner of Income Tax, Andhra Pradesh, Hyderabad, . The question is so answered. No order as to costs.

When the matter goes back to the Tribunal, the Tribunal shall determine whether the appropriation of Rs. 2,40,000 towards gratuity reserve is in excess of the liability of the assessee on account of gratuity determined on an actuarial calculation, and if there is such an excess, only to the extent of that excess will the amount be deemed to be a reserve and includible in computing the capital of the assessee company under rule 1 of the Second Schedule of the Super Profit Tax Act, 1963.