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Commissioner Of Income-Tax, Mysore, ... vs The Mysore Electrical Industries Ltd on 27 April, 1971
cites
Section 4 in The Companies (Profits) Surtax Act, 1964 [Entire Act]
The Income Tax Act, 1961
The Business Profits Act, 1947
Commissioner Of Income-Tax, Delhi vs Aryodaya Ginning And Manufacturing Co. ... on 23 August, 1956
It is well known that the accounts of the company have to be
made up for a year up to a particular day. In this case
that day was the 31st March, 1963. If it was reasonably
practicable to make up the accounts up to the 31st March
1963 and present the same to the directors of the respondent
on April 1, 1963 they could have made up their minds on that
day and declared their intention of appropriating the said
and other sums to reserves of different kinds. But the fact
that they could not do so for the simple reason that the
calculation and collection of figures of all the items of
income, expenditure of the company for the year ending March
31, 1963 was bound to take some time cannot make any
difference to the nature or quality of the appropriation of
the profits to reserves as determined by the directors after
the first of April, 1963. Their determination to
appropriate the sums mentioned to the three separate classes
of reserves on the 8th August 1963 must be related to the
1st of April 1963 i.e. the beginning of the accounts for the
new year and must be treated as effective from that day.
A case very similar to the one before us came up for consi-
deration before the Bombay High Court in Commissioner of In-
come-tax, Delhi v. Aryodya Ginning & Manufacturing Co. Ltd.
(1) In that case the profits of the company for the year
ended 31st December 1948 were shown as Rs. 28,56,997-14-2.
The directors made certain appropriations which included Rs.
11,08,000 to reserve fund and Rs. 1,50,000 to dividend
reserve fund. The report of the directors was made on April
27, 1949 and a general meeting of the shareholders held on
27th June 1949 adopted the report and recommendation of the
directors. The company was assessed to business profits tax
chargeable under the Business Profits Tax Act for the
accounting period 1st January to 31st March 1949 and the
question which arose was: what was the capital of the com-
pany for the accounting period. The company contended that
its paid-up capital should be increased by the amount of
reserves constituted by the recommendation made by the
directors and accepted by the share-holders. The
Commissioner of Income-tax went up to the High Court on a
reference contending that as the reserve was not sanctioned
till 27th June 1949 it could not be looked
(1) 31 I.T.R. 145.
Section 10 in Income Tax Rules, 1962 [Entire Act]
The Commissioner Of Income-Tax And ... vs The Vasantha Mills Limited on 20 March, 1957
The learned Solicitor-General referred to a judgment of
the Madras High Court in Commissioner of Income-tax v.
Vasantha Mills Ltd. (1) where the Madras High Court
dissented from the view expressed by the Bombay High Court
on the ground that there could be no reserve until there was
allocation in fact by a person having the requisite
authority to order that allocation. In our view, although
such allocation was factually not possible on the very first
day of a year but allocation on a later day should be
treated as effective from that day in view of the fact that
the division of undistributed profits became effective from
that day.
Section 34 in The Income Tax Act, 1961 [Entire Act]
1