( 1 ) THE point involved in this case is whether certain amount set apart for payment of gratuity to the retiring labourers would be a "provision" or "reserve" for the purpose of capital computation under the Second Schedule of the Super Profits Tax Act, 1963. The reference in question arises from the assessment proceeding under the Super Profits Tax Act, 1963, for the assessment year 1963-64. The relevant previous year ended on 31st March, 1963.

( 2 ) UNDER the aforesaid Act, tax should be levied on the chargeable profits of the previous year in accordance with the rates set out in the Third Schedule to that Act. "chargeable profits" mean the total income of the assessee computed under the I. T. Act, 1961, for any previous year and adjusted in accordance with the provisions of the First Schedule. The super profits tax is levied only on the balance remaining after adjustment of the balance-sheet deduction against the chargeable profits.

( 3 ) THE assessee is a company carrying on the business of building railway wagons. In the assessment year 1963-64, a sum of Rs. 19,57,258 appeared as provision for labour retiring gratuity as on 1st April, 1962, the relevant date, and