Commissioner of Income Tax vs Permanent Magnets Ltd.

S.P. Bharucha, J.—Two questions arise for consideration in this reference at the instance of the Revenue. They read thus :

" (1) Whether, on the facts and in the circumstances of the case, the sums of Rs. 2,75,000 and Rs. 3,30,000 being dividend paid out of the ''general reserve'' was includible in computing the capital for the purpose of statutory deduction under the Companies (Profits) Surtax Act, 1964, for 1971-72 and 1972-73 assessment years respectively ?

(2) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that rule 4 of the Second Schedule to the Companies (Profits) Surtax Act, 1964, does not apply to the assessee''s case and consequently directing the Income Tax Officer not to reduce the capital by the proportionate sums of Rs. 3,22,858 and Rs. 2,52,282 for the purpose of surtax assessment for 1971-72 and 1972-73 assessment years respectively ?"

Both the questions are, it is agreed, covered, the first by the decision of the Supreme Court in Vazir Sultan Tobacco Co. Ltd., Hyderabad and Others Vs. Commissioner of Income Tax, Andhra Pradesh, Hyderabad, , and the second by this court''s judgment in Commissioner of Income Tax, Bombay City III Vs. Century Spg. and Mfg. Co. Ltd., . Following the aforesaid judgments, the first question is answered in the negative and in favour of the Revenue and the second question is answered in the affirmative and in favour of the assessee.

No order as to costs.