TMI Blog1992 (12) TMI 42X X X X Extracts X X X X X X X X Extracts X X X X ..... y a ground for rectification. The Tribunal's power to rectify its orders under the Act flows from section 1 of the Act. A mistake apparent from the record is made a ground for rectifying the order. The first question was, thus, rightly answered in favour of the Revenue and against the assessee. It is clear that the amount of ₹ 4,50,000 was a provision made to meet a tax liability existing on the relevant date by no stretch of imagination can it be treated as a reserve. Similarly, the second item, an amount of ₹ 15,82,000 set apart for proposed dividend cannot also be treated as a reserve but as a provision for meeting a current liability. The same must be said about the third item of ₹ 6,99,913, the amount set apart for profit-sharing bonus. With respect to the last item of ₹ 50,000 which was a provision for pension scheme, there can equally be no dispute that it is a provision. The amount of ₹ 9,97,410 credited to the Depreciation Fund was the excess amount over the amount actually allowed as depreciation in the assessments made under the Income-tax Act. It thus clearly constitutes reserves as per the decision in Vazir Sultan [1981 (9) TMI 105 - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lly allowed in the income-tax assessment was a reserve in depreciation which should be included in the computation of the assessee's capital for the purposes of the Companies (Profits) Surtax Act, 1964 ? " The assessee is a private limited company known as Karamchand Premchand P. Ltd., Ahmedabad, which was subsequently renamed as Shahibaug Entrepreneurs P. Ltd., Ahmedabad. For the assessment year 1964-65, the assessee filed a return under the Act for the period ending March 31, 1964, disclosing its chargeable profits at Rs. 67,001. The Incometax Officer did not agree with the several claims made in the return. He determined the chargeable profits at Rs. 4,72,534 and the net tax payable at Rs. 1,86,338.44. An appeal preferred by the assessee was dismissed by the Appellate Assistant Commissioner of Super Profits Tax, A-Range, Ahmedabad. The assessee then carried the matter to the Income-tax Appellate Tribunal. By its order dated July 1, 1971, the Tribunal allowed the appeal allowing several claims of the assessee. Soon thereafter, the Revenue filed an application bringing to the notice of the Tribunal the Explanation appended to rule I in the Second Schedule to the Act. The Tribun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Incometax Act, 1961 ( 43 of 1961 ) ; (iii) its other reserves as reduced by the amounts credited to such reserves as have been allowed as a deduction in computing the income of the company for the purposes of the Indian Income-tax Act, 1922 (11 of 1922), or the Income-tax Act, 1961 (43 of 1961 ) ; (iv) the debentures, if any, issued by it to the public: Provided that according to the terms and conditions of issue of such debentures, they are not redeemable before the expiry of a period of seven years from the date of issue thereof ; and (v) any moneys borrowed by it from the 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 are borrowed provides for the repayment thereof during a period of not less than seven years. Explanation. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for rectification. The Tribunal's power to rectify its orders under the Act flows from section 1 of the Act. A mistake apparent from the record is made a ground for rectifying the order. The first question was, thus, rightly answered in favour of the Revenue and against the assessee. The second question contains four items and the question is whether they are merely provisions or reserves. For a proper appreciation of the first item of Rs. 4,50,000, being the amount set apart for contingent liabilities, it is necessary to state a few facts. On August 18, 1956, the assessee had applied to the Commissioner of Income-tax requesting him not to invoke the provisions of section 23A of the Indian Income-tax Act, 1922, against it. Pending the said application, it had set apart a sum of Rs. 6,52,000 for meeting the liability in the accounting year ending on March 51, 1956. During the financial year 1958-59, a sum of Rs. 2,02,000 was transferred from this amount to the general reserves through profit and loss account, with the result that a sum of Rs. 4,50,000 continued to be shown in the balance-sheet as provision for taxation as on April 1, 1963. By his order dated April 15, 1957, the Co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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