ISMAIL J.

The Income-tax Appellate Tribunal, Madras Bench, under section 256 (1) of the Income-tax Act, 1961, has referred the following question for the opinion of this court :

"Whether on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the amounts of Rs. 15, 50, 000 being provision for tax liability Rs. 1, 36, 060 being provision for payment of gratuity to employees and Rs. 5, 69, 000 being provision for payment of bonus to employees as on 1st April, 1962, being the first day of the previous year relevant to the assessment year 1963-64, were not to be included in computing the assesee's capital for the purpose of the Super Profits tax Act, 1963 ?" *

The matter lies within a very narrow compass and it concerns the questions as to what constitutes, "reserve" as contemplated by Paragraph 1 of Schedule II of the Super Profits Tax Act, 1963 (hereinafter called "the Act").

The assessee is a public limited company registered under the companies Act and is running a composite spinning and weaving mills at Mettur Dam, Salem District. Before the Income-tax Officer, certain amounts under various heads had been claimed as reserve for