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1986 (7) TMI 88 - SC - Income TaxWhether Capital reserve, Stocks and Stores reserves, Bad and Doubtful Debts reserves, Obsolescence reserve, Loans and Insurance reserve, Investment reserve, and Forfeited Moneys were to be included in the computation of capital according to the provisions in the Second Schedule to the Super Profits Tax Act, 1963? Held that:- It may be mentioned that where the liability has actually arisen or is anticipated legitimately by the assessee though the quantum of the liability has not been determined, a fund to meet such present liability cannot be treated as It reserves ". A fund, however, created for payment of a liability which had not already arisen or fallen due but is only a provision with regard to the sum that might become liable to be paid is " other reserves " within the meaning of rule I of the Second Schedule and should be taken into account in computing the capital of the company for the purpose of the Companies (Profits) Surtax Act, 1964. In that view of the matter, we are of the opinion that the decision of the High Court was right in treating it as reserve.
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