JUDGMENT

SABYASACHI MUKHARJI, J. :— These two appeals were heard together. Civil Appeal No. 1665 of 1974 arises from the decision of the High Court of. Allahabad in Income-tax Reference No. 195 of 1971 : (reported in 1973 UPTC 707).

2. The assessee, Elgin Mills Ltd., at the relevant time, was a public limited company engaged in the business of manufacture of textile goods. The assessment year involved is the year 1964-65 of which the relevant previous year ended on 30th September, 1963. For the purposes of assessment under the provisions of Companies Profits (Surtax) Act, 1964, a dispute arose between the assessee and the revenue with regard to the computation, of "Standard deductions". The company claimed that the following mounts should be treated as reserves for the purposes of computation of its capital :

(a) Investment Reserve - Rs. 85,00,000

(b) Rehabilitation Reserve - Rs. 40,00,000

(c) Forfeited Dividend Reserve - Rs. 96,374

3. The Income-tax Officer did not include any of the said reserves in the capital of the assessee-company on the basis that these did not represent reserve in the real sense. On appeal, the Appellate Assistant Commissioner held that the Rehabilitation reserve and Forfeited Dividends reserve represented reserves but the investment reserve account, did not constitute real reserve. Both the assessee as well as the revenue went up in appeal before the Tribunal. The Tribunal disposed of these appeals by a similar order along with two similar appeals relating to the assessment year 1963-64 which arose out of proceedings under the Super Profits Tax Act, 1963. The Tribunal held that all the three accounts represented reserves for the purposes of assessment under the Super Profits Tax Act, 1963. The Tribunal was further of the view that all the three represented reserves for the purposes of assessment under the Super Profits Tax Act, 1963 and as the principle involved was the same, as under the Companies Profits (Surtax) Act, 1964, the Tribunal held that the accounts in question represented reserves under the latter Act also. At the instance of the Commissioner, reference was made to the High Court for the assessment year 1964-65 on the following questions :

"1) Whether, on the facts and in the circumstances of the case, the Tribunal was right in arriving at its decision by applying the principles laid down in the second schedule to the Super Profits Tax Act, 1963, instead of the provisions of the second Schedule to the Companies Profits (Surtax) Act, 1964, for computation of capital of the assessee company for the assessment year 1964-65.

2) Whether, on the facts and in the circumstance of the case, the tribunal was right in holding that (a) Investment Reserve (b) Rehabilitation Reserve (c) Forfeited Dividend Reserve were includible in the capital computation of the company in accordance with the Second Schedule to the Companies Profits (Surtax) Act, 1964."

4. The High Court noted that in the connected reference No. 196 of 1971 - Commr. of Income-tax v. Elgin Mills Company Ltd. (decision dated 19th July, 1973) arising out of proceedings under the Super Profits Tax Act, 1963, it had already held that these accounts in question constituted reserve in the real sense and as such should be taken into consideration in determining the standard deductions under Section 9(2) of the Act, 1963. It was not disputed before the High Court that if the present reference had been under the Super Profits Tax Act, 1963, the accounts in question would have to be held as reserves by the High Court in view of its previous judgment. But it was contended that the provisions of the Companies Profits (Surtax) Act, 1964 were different from the provisions of the Super Profits Tax Act, 1963. The High Court did not accept this contention. The High Court was of the view that under both the Acts, charging sections (section 4) were identically worded except that the expression "standard deduction" in Super Profits Tax Act, 1963 had been replac