( 1 ) THIS reference arises out of the assessment of A. P. V. Engineering Co. Ltd. , under the Super Profits Tax Act, 1963, in the assessment year 1963-64, the previous year thereto being the calendar year 1962. The facts found and/or admitted in the proceedings are as follows : in the balance-sheet of the assessee as at 31st December, 1961, a sum of Rs. 3,35,914 was shown under the head "provision" as "provision for Taxation less advance payments under provisional assessments". Under the head "reserves and Surplus ", another sum of Rs. 11,41,689 was shown as " Manufacturing, Trading and Profit and Loss Account--balance at credit after providing for the proposed dividend for the year ended 31-12-61".

( 2 ) THE assessee plaimed that the said amounts of Rs. 3,35,914 and Rs. 11,41,689 should both be treated as reserves under Rule 1 of the Second Schedule to the S. P. T. Act, 1963, and be included in its capital base in the said assessment year. The ITO held that the amounts did not represent reserves inasmuch as one of them was specifically earmarked as a provision to meet a particular liability and the other represented unappropriated profits not transferred to