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

S.P. Bharucha, J.—This reference raises two questions. The first question is at the instance of the assessee and the second is at the instance of the Revenue. The questions read thus :

"(1) Whether, on the facts and in the circumstances of the case, the dividend reserve of Rs. 3,50,000 as on January 1, 1966, is includible as ''reserve'' in the computation of capital of the assessee-company for the assessment year 1967-68 in terms of rule 1 of the Second Schedule to the Companies (Profits) Surtax Act, 1964 ?

(2) Whether, on the facts and in the circumstances of the case, the gratuity reserve of Rs. 4,00,000 as on January 1, 1966, is includible as ''reserve'' in the computation of capital of the assessee-company for the assessment year 1967-68 in terms of rule 1 of the Second Schedule to the Companies (Profits) Surtax Act, 1964 ?"

Counsel are agreed that the first question must be answered in the negative and in favour of the Revenue in view of the judgment of the Supreme Court in Vazir Sultan Tobacco Co. Ltd., Hyderabad and Others Vs. Commissioner of Income Tax, Andhra Pradesh, Hyderabad, . The first question is, accordingly, so answered.

It is also agreed that the second question must be answered in the negative and in favour of the Revenue in view if the same Supreme Court judgment. The question is, accordingly, so answered. When the matter goes back to the Tribunal, the Tribunal shall determine whether the appropriation of Rs. 4 lakhs towards gratuity reverse is in excess of the liability of the assessee on account of gratuity determined on actuarial calculation.

If there is such excess, the amount thereof shall be deemed to be a reserve and includible in the computation of the capital of the assessee-company under rule 1 of the Second Schedule to the Companies (Profits) Surtax Act, 1964.

No order as to costs.