A reserve for super profits tax created before the enactment of the Super Profits Tax Act is a reserve within the meaning of Rule 1 of the Second Schedule to the Companies (Profits) Surtax Act, 1964, and should be included in the computation of capital for the purpose of determining the statutory deduction under the Act.

BIMAL CHANDRA BASAK, J.

( 1 ) THE following question arises for determination by this court in this reference :" Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the sum of Rs. 9 lakhs claimed as reserve for super profits tax was a reserve within the meaning of Rule 1 of the Second Schedule to the Companies (Profits) Surtax Act, 1964, and should be included in the computation of capital for the purpose of the said Act ? "

( 2 ) WE ought to point out that this question has been referred at the instance of the revenue. There is another reference arising out of another application made by the assessee. A separate paper book has been filed in respect of the same and by our order we have directed the same to appear as a separate reference. We are concerned in this reference with only the question referred to above.

( 3 ) THE facts admitted and/or not disputed are as follows : There is an Act called the Super Profits Tax Act, 1963, which received the assent of the President on the 4th May, 1963. The relevant provisions of the said Act are as follows : section 4 :" Charge of tax.--Subject to the provisions contained in this Act, there shall be charged on every company for every assessment year commencing on and from the 1st day of April, 1963, a tax (in this Act referred to as the super profits tax) in respect of so much of its chargeable profits of the previous year or previous years, as the case may be, as exceed the standard deduction, at the rate or rates specified in the Third Schedule. "second Schedule to the Act ?" 1. Subject to the other provisions contained in this Schedule, the capital of a company shall be the sum of the amounts, as on the first day of the previous year relevant to the assessment year, of its paid up share capital and of its reserve, if any, created under the proviso (b) to Clause (vib) of Sub-section (2) of Section 10 of the Indian Income-tax Act, 1922 (11 of 1922), or under Sub-section (3) of Section 34 of the Income-tax Act, 1961 (43 of 1961), and of its other reserves in so far as the amounts credited to such other reserves have not been allowed in computing its profits for the purposes of the Indian Income-tax Act, 1922 (11 of 1922), or the Income-tax Act, 1961 (43 of 1961), diminished by the amount by which the cost to it of the assets the income from which in accordance with Clause (iii) or Clause (vi) or Clause (vii) of Rule 1 of the First Schedule is not jncludible in its chargeable profits, exceeds the aggregate of- (i) any money borrowed by it which remains outstanding ; and (ii) the amount of any fund, any surplus and any such reserve as is not to be taken into account in computing the capital under this rule. Explanation 1.--A paid up share capital or reserve brought into existence by creating or increasing (by revaluation or otherwise) any book asset is not capital for computing the capital of a company for the purposes of this Act. Explanation 2.--Any premium received in cash by the company on the issue of its shares standing to the credit of the share premium account shall be regarded as forming part of its paid up share capital. Explanation 3.--Where a company has different previous years in respect of its income, profits and gains, the computation of capital under Rule 1 and Rule 2 of this Schedule shall be made with reference to the previous year which commenced first. "

( 4 ) THIS Bill is dated 28th February, 1963. I ought to point out that by Section 35 of the Finance Act, 1964, which came into effect on the 28th April, 1964, there is discontinuance of the Super Profits Tax Act, 1963. On 2nd of May, the Surtax Act, 1964, received the assent of the President.

( 5 ) THE relevant provisions of the 1964 Act are as follows : Section 2 (5) :" ' Chargeable profits ' means the total income of an assessee computed under the Income-tax Act, 1961 (43 of 1961), for any previous year or years, as the case may be, and adjusted in accordance with t

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