Bombay High Court
Commissioner Of Income-Tax vs Duphar Interfran Ltd. on 30 April, 1991
Equivalent citations: [1992]197ITR28(BOM)
JUDGMENT T.D. Sugla, J.
1. In this departmental reference relating to the assessee's assessment years 1971-72 and 1972-73, the Income-tax Appellate Tribunal has referred to this court the following questions of law for opinion under section 256(1) of the Income-tax Act, 1961 :
2. Assessment year 1971-72 :
"1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the amount of Rs. 2,128 being part of the gratuity reserve should not be reduced in the computation of capital base under the Companies (Profits) Surtax Act, 1964 ?
2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that rule 4 cannot be invoked for reducing the capital base, where relief under section 80J of the Income-tax Act, 1961, was allowed and consequently directing that the capital computed in accordance with rules 1, 2 and 3 of the Second Schedule to the Companies (Profits) Surtax Act, 1964, should not be diminished by Rs. 5,04,391 for the assessment year 1971-72 ?"
3. Assessment year 1972-73 :
"Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that dividend declared out of the general reserve should not be reduced in computing the capital base for surtax purposes under the Companies (Profits) Surtax Act, 1964 ?"
4. Counsel are agreed that, in view of the Supreme Court's judgment in the case of Second ITO v. Stumpp Schuele and Somappa P. Ltd. [1991] 187 ITR 108, the second question pertaining to the assessment year 1971-72 is to be answered in the affirmative and in favour of the assessee and that, in view of another decision of the Supreme Court in the case of Vazir Sultan Tobacco Co. Ltd. v. CIT , the question relating to the assessment year 1972-73 is to be answered in the negative and in favour of the Revenue. The above two questions are so answered.
5. As regards question No. 1, relating to the assessment year 1971-72, the facts are stated in paragraph 5 of the statement of the case which are reproduced hereunder :
"5. The second ground which is confined to assessment year 1971-72 only relates to the sum of Rs. 2,128 being the portion of gratuity reserve. The gratuity reserve should be Rs. 4,66,728 as on January 1, 1970, but the Income-tax Officer reduced three sums, viz., Rs. 2,128, Rs. 55,182 and Rs. 2,10,502. However, it was the contention of the assessee before the Appellate Assistant Commissioner that the Income-tax Officer was not justified in deducting the amount of Rs. 2,128 as this amount was not part of the gratuity reserve as on January 1, 1970, and this pertained to the financial year 1970 and was actually deducted in the assessment for the assessment year 1971-72. As the Appellate Assistant Commissioner was satisfied that this was an inadvertent mistake on the part of the Income-tax Officer, he directed the Income-tax Officer to make necessary adjustment. The Tribunal also concurred with the view of the Appellate Assistant Commissioner and held that the Income-tax Officer was not correct in reducing the sum from the gratuity reserve as this was not part of the gratuity reserve as on January 1, 1970, but pertained to the financial year 1970, and was deducted in the income-tax assessment for the year 1971-72."
6. It is evident from the above that the amount of Rs. 2,128 did not represent gratuity liability for the assessment year 1970-71 or any other earlier assessment year. It represented the gratuity liability of the assessee for the assessment year 1971-72. We are concerned here with the capital computation of the assessee-company as on the first day of the previous year, that is, on the last day of the earlier period relating to the assessment year 1970-71. Accordingly, we do not agree with Shri Jetley, that the first question is also covered by the Supreme Court's decision in Vazir Sultan Tobacco Co. Ltd. v. CIT , and answer the question in the affirmative and in favour of the assessee. No order as to costs.