G.K. MITTER, J.

1. THE matter arises out of a reference under section 66(2) of the Indian Income-tax act r/w s. 19 of the Business Profits Tax Act. The points of law involved are (1) whether an amount shown in the balance-sheet of the assessee company year after year at the same figure under the head "capital paid in surplus" represents premium realised from the issue of shares as contemplated by r. 3 of Schedule II of the Business Profits Tax Act, 1947, and (2) whether the several amounts appearing in the balance-sheets of the assessee company shown as "earned surplus" at the end of each year should be treated as reserves within the meaning of sub-rule (1) of r. 2 of Schedule II of the said Act. A further question also arises, namely, whether the "capital paid in surplus" can be treated as a "reserve" within the meaning of the Act.

2. THE Business Profits Tax Act (hereinafter referred to as the Act), which came into force on 11th April, 1947, had for its object the imposition of a special tax on income arising from business by reason of the abnormal profits made in consequence of the war. This tax was over and above the levy under the Indian IT Act, 1922. The Act, however,