TMI Blog1986 (7) TMI 86X X X X Extracts X X X X X X X X Extracts X X X X ..... reversed the entries in a subsequent year in its books, it is apparent that the amount cannot be described as a " provision ". It can only be described as a " reserve ". It was part of the capital which fell for computation under rule I of the Second Schedule. Appeal dismissed. - - - - - Dated:- 16-7-1986 - Judge(s) : SABYASACHI MUKHERJEE., R. S. PATHAK JUDGMENT The judgment of the court was delivered by R. S. PATHAK J.-This appeal by special leave is directed against the judgment of the High Court of Allahabad pronouncing on the meaning of the expression " reserves " in the Second Schedule to the Super Profits Tax Act, 1963. For the assessment years 1961-62 and 1962-63, the assessee had debited an amount of Rs. 5,40,000 and a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the assessee had not made any such provision in the subsequent years. It was also not disputed that no such payment was ever actually made by the assessee. In the circumstances, the Appellate Tribunal held that the liability for which the " provision " was made was at best unreal and imaginary or the mere possibility of a liability. The Appellate Tribunal was unimpressed by the description of the item as IC provision " by the assessee in its balance-sheet. The Appellate Tribunal held that the amount represented a " reserve " and should have been included in the capital computation of the assessee. At the instance of the Revenue, the Appellate Tribunal referred the case to the High Court of Allahabad for its opinion on the following q ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... context of the Super Profits Tax Act, 1963, and the analogous enactment, the Companies (Profits) Surtax Act, 1964. In recent decision in Vazir Sultan Tobacco Co. Ltd. v. CIT [1981] 132 ITR 559, this court had occasion to examine the significance and scope of the concept. In doing so, it referred to the earlier pronouncement of the court in Metal Box Co. of India Ltd. v. Their Workmen [1969] 73 ITR 53, 67: " The distinction between a provision and a reserve is in commercial accountancy fairly well-known. Provisions made against anticipated losses and contingencies are charges against profits and, therefore, to be taken into account against gross receipts in the profit and loss account and the balance-sheet. On the other hand, reserves are ..... X X X X Extracts X X X X X X X X Extracts X X X X
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