( 1 ) THE assessee is a limited company and the instant reference under Section 256 (1) of the I. T. Act, 1961, read with Section 18 of the C. (P.) S. T. Act, 1964, relates to the assessment years 1964-65, 1965-66 and 1966-67. For these assessment years, the assessee-company claimed before the ITO that in the computation of capital under Schedule II to the C. (P.) S. T. Act, 1964, the reserves for depreciation on investments amounting to Rs. 3 lakhs should be included in the capital computation for all the three years. Similarly, for the assessment years 1965-66 and 1966-67, the assessee-company claimed that reserves for doubtful debts should be included in the capital computation. The ITO, however, did not accept this claim. Being aggrieved, the assessee preferred an appeal before the AAC. The AAC dealing with the said contention observed, inter alia, as follows: " The issue raised is the Income-tax Officer's not including the undermentioned reserves in the computation of the capital basis for working out the standard deduction for these three assessments :--

Rs. Rs. Rs.

For depreciation on investments 3,00,000 3,00,000 3,00,000

For doubtful debts