COMMISSIONER OF INCOME TAX vs UNION CARBIDE INDIA LTD.

BHAGWATI PRASAD BANERJEE, J. :

In this reference the Tribunal has referred the following two questions of law to this Court under s. 256(1) of the IT Act, 1961, in respect of the asst. yr. 1976-77 for which the relevant year of account is the year ending 25th December, 1975 :

"1. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the sum of Rs. 9,21,238 representing profit made on exchange adjustment in respect of the loan liability due to EXIM Bank was a reserve within the meaning of the Second Schedule to the Companies (Profits) Surtax Act, 1964, and shall be included in computing the capital under the Second Schedule ?

Whether, on the facts and in the circumstances of the case, the following item (s) or any of them constituted reserve and should be included in the capital computation base for the accounting year relevant to the asst. yr. 1976-77 under the Second Schedule to the Companies (Profits) Surtax Act, 1964 ?"

Rs.

(i) Provision for bonus

30,00,000

(ii) Provision for technical services fees

49,80,000

(iii) Provision for bad and doubtful debts

15,97,797

(iv) Provision for gratuity

49,22,327

(v) Provision for contingencies

6,00,000

The question No. 1 is concluded by the judgment in the case between the parties in IT Ref. No. 113 of 1978 (Judgment delivered on 6th of March, 1989) since reported as Commissioner of Income Tax Vs. Union Carbide India Ltd., . Following the said judgment this question of law is answered in the affirmative and in favour of the assessee.

The question No. 2 is now covered by the judgment delivered today between the parties in IT Ref. No. 261 of 1981. Following the said judgment, this question of law is answered in the affirmative and in favour of the assessee.

There will, however, be no order as to costs.

SUHAS CHANDRA SEN, J. :

I agree.