TMI Blog1971 (4) TMI 2X X X X Extracts X X X X X X X X Extracts X X X X ..... ums appropriated by the directors of the respondent towards reserves on the gtli August, 1963, out of the profits of the year ending 31st March, 1963, should be added to other items for computation of the capital of the respondent as on the 1st day of April, 1963, in terms of rule 1 of the Second Schedule to the Companies (Profits) Surtax Act, 1964, hereinafter referred to as the "Act". The Act which received the assent of the President on 2nd May 1964, is an Act to impose a special tax on the profits of certain companies. Under section 4 of the Act a tax known as surtax became chargeable on every company for every assessment year commencing on and from the 1st day of April, 1964, in respect of so much of its chargeable profits of the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have been allowed as a deduction in computing the income of the company for the purposes of the Indian Income-tax Act, 1922 (XI of 1922), or the Income-tax Act, 1961 (XLIII of 1961) ; (iv) its debentures, if any ; and (v) any moneys borrowed by it from Government or the Industrial Finance Corporation of India or the Industrial Credit and Investment Corporation of India or any other financial institution which the Central Government may notify in this behalf in the Official Gazette or any banking institution (not being a financial institution notified as aforesaid) or any person in a country outside India : Provided that such moneys are borrowed for the creation of a capital asset in India and the agreement under which such moneys a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itation reserves ; (2) Rs. 1,00,000 as loan redemption reserves, and (3) Rs. 89,557 as development rebate reserve. These are three of the items of reserve which the directors of the respondent in their report to the general body of the shareholders proposed as appropriations out of the profits of the year ending on 31st March, 1963. The sole contention on behalf of the appellant is that these appropriations having been made on the 8th August, 1963, could not be treated as components of capital "as on the first day of the previous year", i.e., the first of April, 1963, in terms of rule I to the Second Schedule. The learned Solicitor-General submitted that these could only be taken into consideration in the subsequent year commencing on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Bombay High Court in Commissioner of Income-tax v. Aryodaya Ginning Manufacturing Co. Ltd. In that case the profits of the company for the year ended 31st December, 1948, were shown as Rs. 28,56,997-14-2. The directors made certain appropriations which included Rs. 11,08,000 to reserve fund and Rs. 1,50,000 to dividend reserve fund. The report of the directors was made on April 27, 1949, and a general meeting of the shareholders held on 27th June, 1949, adopted the report and recommendation of the directors. The company was assessed to business profits tax chargeable under the Business Profits Tax Act for the accounting period 1st January to 31st March, 1949, and the question which arose was: what was the capital of the company for the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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