TMI Blog1981 (4) TMI 71X X X X Extracts X X X X X X X X Extracts X X X X ..... only the balance should be deducted from the capital computation under clause (ii) of rule 2 of the Second Schedule to the said Act ? " The assessment year involved is 1965-66. The assessee is a private limited company. In computing the chargeable profits under the Companies (Profits) Surtax Act, 1964, the assessee claimed that the proposed dividend of Rs. 11,55,908 should not be deducted from the capital base as it constituted a surplus fund within the meaning of r. 2 of Sch. II to the aforesaid Act. But the ITO did not allow this claim, without stating any reason in his order. On appeal, the AAC found that exactly a similar claim had been allowed in the earlier assessment year 1964-65 by him. Following this order for the earlier year, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No. 31 (Cal) of 1973-74. The Tribunal, therefore, upheld the order of the AAC. Now, we are concerned with the expression " surplus " in r. 2 of Sch. II to the C. (P.) S.T. Act, 1964. The material portion of the said provision reads as follows: "2. Where a company owns any assets the income from which in accordance with clause (iii) or clause (vi) or clause (viii) of rule 1 of the First Schedule is required to be excluded from its total income in computing its chargeable profits, the amount of its capital as computed under rule I of this Schedule shall be diminished by the cost to it of the said assets as on the first day of the previous year relevant to the assessment year in so far as such cost exceeds the aggregate of (i) any moneys ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for taxation. The question was whether such a provision for taxation could be considered to be a fund within the meaning of the said rule to the Second Schedule of the C. (P.) S.T. Act, 1964. Provision for taxation may be a fund, because it would be payable upon quantification. But that position would not be applicable in the case of proposed dividend which becomes payable immediately upon the declaration and which automatically in all cases practically follows after the recommendation by the directors to the shareholders. Similarly, the question involved in the case of Duncan Brothers Co. Ltd. v. CIT [1981] 128 ITR 302 (Cal) was again entirely different. In that view of the matter, in our opinion, the Tribunal was in error in consid ..... X X X X Extracts X X X X X X X X Extracts X X X X
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