National Rayon Corporation Ltd. vs Commissioner of Income Tax Commissioner of Income Tax Vs National Rayon Corporation Ltd.

T.D. Sugla J.

There are cross references. They relate to the assessee''s assessment for the year 1974-75. The Income Tax Appellate Tribunal has referred to this court, the following two questions of law for our opinion u/s 256(1) of the Income Tax Act, 1961.

By the assessee :

"1. Whether, on the facts and in the circumstances of the case the dividend of Rs. 1,21,66,645 declared by the company after the first day of the deducted from the balance of the general reserve as on the first day of the relevant previous year for computing ''statutory deduction'' under the Companies (Profits) Surtax Act, 1964 ?"

By the Commissioner :

"Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the assessee company''s debenture redemption reserve, and gratuity reserve, constituted reserves and were to be included in the computation of the assessee company''s capital for the purpose of the Companies (Profits) Surtax Act, 1964 ?"

Counsel are agreed that, in view of the Supreme Court''s decision in the case of Vazir Sultan Tobacco Co. Ltd., Hyderabad and Others Vs. Commissioner of Income Tax, Andhra Pradesh, Hyderabad, , the question referred to us at the instance of the assessee is to be answered in the affirmative and in favour of the Revenue. The question is so answered.

Counsel are also agreed that, in view of our court''s judgement in the assessee''s own cases in Commissioner of Income Tax Vs. National Rayon Corporation Ltd., and Commissioner of Income Tax Vs. National Rayon Corporation Ltd., , second question, that is the question referred to us at the instance of the Commissioner is also to be answered in favour of the Revenue. Accordingly, we answer the second question in the negative and in favour of the Revenue subject to the direction that the Tribunal, while giving effect to our judgement determine, whether and to what extent the gratuity reserve is in excess of the assessee''s gratuity liability determined on an actuarial basis. It will be only the excess, if any, that will have to be treated as "reserve".

It is stated by Shri Mehta, learned counsel for the assessee, that as regards the question referred to us at the instance of the Commissioner, our court has granted leave to appeal to the Supreme Court against the judgments in Commissioner of Income Tax Vs. National Rayon Corporation Ltd., . Accordingly, leave to appeal is granted as regards this question in this case also. No order as to costs.