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1965 (4) TMI 12 - SC - Income TaxWhether the profit arising to the assessee-company from miscellaneous insurance transactions of a mutual character was assessable under the Indian Income-tax Act ? and Whether on the facts and in the circumstances of the case, if the answer to question No. (1) is in the affirmative, the balance of the profits as disclosed in the assessee-company's profit and loss account after deducting the various reserves should be the taxable profits within the meaning of section 2(6C) read with rule 6 of the Schedule of the Indian Income-tax Act ? Held that:- It is true that the Bombay High Court was concerned with rule 2, but when we go to the Schedule and find out what is the balance of profits or surplus that has been made taxable, it does not make any difference to the construction of section 2 (6C) whether it is rule 2 that is applied or rule 6. Therefore, disagreeing with the High Court, we answer the first question in the affirmative. Examining rule 6 in the light of this background, it seems to us that the intention of the rule is that the balance of profits as disclosed by the accounts submitted to the Superintendent of Insurance and accepted by him would be binding on the Income-tax Officer, except that the Income-tax Officer would be entitled to exclude expenditure other than expenditure permissible under the provisions of section 10 of the Act. It is common ground in this case that the reserves which were added to the balance of profits were not expenditure. Accordingly, agreeing with the High Court, we answer the second question in the affirmative. Appeal allowed in part.
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