TMI Blog1984 (10) TMI 41X X X X Extracts X X X X X X X X Extracts X X X X ..... t attracted to such a case. The judgment of the High Court does not, therefore, call for any interference. Appeal dismissed. - - - - - Dated:- 16-10-1984 - Judge(s) : V. D. TULZAPURKAR., D. P. MADAN., V. BALAKRISHNA ERADI JUDGMENT The judgment of the court was delivered by ERADI J.-Whether a company in liquidation is chargeable to super profits tax under the Super Profits Tax Act, 1963 (Act XIV of 1963) (hereinafter called " the Act is the short question arising for determination in this appeal. The answer thereto will depend upon whether, during the period subsequent to the date of winding up, any part of the funds in the hands of the official liquidator can be distinctly classified as representing paid-up share capital of the company as on the first day of the year of account relevant to the assessment year and whether any portion of the fund can be similarly identified as forming a " reserve ". The assessee is a banking company, namely, the Palai Central Bank Ltd., which went into liquidation on August 8, 1960. On that date, the official liquidator took charge of the assets and liabilities of the company and a balance-sheet has been prepared as on the same date. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as incapable of ascertainment. The Tribunal, accordingly, allowed the appeal of the assessee and held that no assessment to super profits tax could be made on a company in liquidation. Thereafter, at the instance of the Revenue, the Tribunal referred the following question of law to the High Court of Kerala for its opinion: " Whether, on the facts and in the circumstances of the case, was the Tribunal justified in holding that no assessment under the Super Profits Tax Act, 1963, can be made on the assessee-company (in liquidation)?" The High Court agreed with the view taken by the Tribunal that after a company has gone into liquidation, there cannot be said to be in the hands of the liquidator any amount that can be distinctly designated as paid-up share capital of the company or as " reserve " with respect to which the capital of the company is to be worked out as provided in the Second Schedule to the Act in order to arrive at the amount of standard deduction.. The question referred was, accordingly, answered by the High Court in the affirmative, that is, in favour of the assessee and against the Revenue. Aggrieved by the said decision, the Revenue has preferred this app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ision is contained in rule of the said Schedule which is in the following terms : "1. Subject to the other provisions contained in this Schedule, the capital of a company shall be the sum of the amounts, as on the first day of the previous year relevant to the assessment year, of its paid-up share capital and of its reserve, if any, created under the proviso (b) to clause ( ) of sub-section (2) of section 10 of the Indian Income-tax Act, 1922 (XI of 1922), or under sub-section (3) of section 34 of the Income-tax Act, 1961 (XLIII of 1961), and of its other reserves in so far as the amounts credited to such other reserves have not been allowed in computing its profits for the purposes of the Indian Income-tax Act, 1922 (XI of 1922), or the Income-tax Act, 1961 (XLIII of 1961), diminished by the amount by which the cost to it of the assets the income from which in accordance with clause (iii) or clause (vi) or clause (vii) of rule I of the First Schedule is not includible in its chargeable profits, exceeds the aggregate of (i) any money borrowed by it which remains outstanding; (ii) the amount of any fund, any surplus and any such reserve as is not to be taken into account in co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... B 52 (CA), at p. 63, Pollock M.R. observed : " It is a misapprehension, after the liquidator has assumed his duties, to continue the distinction between surplus profits and capital. Lord Macnaghten in Birch v. Cropper, [1889] 14 AC 525, the case which finally determined the rights inter se of the preference and ordinary shareholders in the Bridgewater Canal, said : 'I think it rather leads to confusion to speak of the assets which are the subject of this application as 'surplus assets' as if they were an accretion or addition to the capital of the company capable of being distinguished from it and open to different considerations. They are part and parcel of the property of the company-part and parcel of the joint stock or common fund-which at the date of the winding up represented the capital of the company'" The above statement of the law was cited with approval and adopted by this court in CIT v. Girdhardas and Co. Private Ltd. [1967] 63 ITR 300 (SC) and it was held that in respect of a company in liquidation after the date of its winding up, the distinction between capital, reserve and the accumulated profits disappear and there is only one integrated or consolidated fund ..... X X X X Extracts X X X X X X X X Extracts X X X X
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