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TMI Blog1980 (4) TMI 191X X X X Extracts X X X X X X X X Extracts X X X X ..... reserve for the purposes of computing the capital base with reference to which the standard deduction is worked out. The dividend equalisation reserve was Rs. 1 lakh for all the three years and the ITO took the view that it is a provision to meet a specific liability at a future date and that it could not therefore be included in the capital base. This view was confirmed in first appeal. The question of dividend reserve had specifically come up before the Bombay High Court in CIT vs. Marrior (India) Ltd. (1) and decided in favour of the tax payer. In this case, dividends had actually been paid out of general reserve. Even, so, it was considered as a reserve because it was shown in the balance-sheet as a reserve and in a "commonsense point o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 31st March, 1967. There were further appropriations taken to the reserves subsequently and the figure for asst. yr. 1970-71 stood at Rs. 17,10,196. However, the ITO took the general reserves only at Rs. 13,50,000 for all the three years because of the pending disputes before the High Court and not all the appropriations were approved by the Board of Directors or the general body, since no meetings could be held after 31st March, 1967 and the finalisation of accounts for all the three years. The AAC who passed the order for asst. yr. 1970-71 took the view that the appeal on this point was raised by way of additional grounds and that such additional grounds were signed "by a person not duly authorised to sign." We find that it was signed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt. It is, however, stated that there has been a valid resolution subsequently which should be treated as taking effect from the date of appropriation. Since we had remitted the matter back to the ITO in respect of similar appropriations in the preceding paragraph, it is only proper that this matter also goes back to the ITO. The further question whether the provision for proposed dividend should be taken as a reserve or not was sought to be disputed by the parties, the learned Departmental Representative relying upon the decision of the Madras High Court in the case of Madras Auto Services & others vs. CIT (3). While the learned counsel relying upon a subsequent Full Bench decision in tax payer's favour in the case of Madras Motor & Genera ..... X X X X Extracts X X X X X X X X Extracts X X X X
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