SOUTHERN ROADWAYS LIMITED Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE following question has been referred at the instance of the assessee :

(2.) SINCE we are referring this matter to a Full Bench, we feel that it is not necessary to set out the facts or the arguments in detail. Suffice it to state that the learned counsel for the assessee relied on a Full Bench judgment in Madras Motor and General Insurance Co. Ltd. v. CIT [1979] 117 ITR 534 (Mad) as concluding this question. In this decision, this court considered the scope of r. 1, Second Schedule, to the Companies (Profits) Surtax Act, 1964. SINCE the assessee, in that case, was an insurance company, the argument on behalf of the revenue based on Expln. II to r. 1 was not considered and no definite answer was given. In the present case, since the assessee is not an insurance company, the computation of the capital will have to be done with reference to the Explanation. Though the Full Bench decision related to an insurance company, as if the principle laid down in that judgment was applicable even to non-insurance companies, a Division Bench, without going into the Explanation, simply purported to apply the principle in the decision in India Motor Parts & Accessories Ltd. v. CIT . It may also be mentioned that there was an earlier Bench judgment in Madras Auto Service v. CIT [1978] 112 ITR 540 (Mad), which held that a provision for dividends cannot be considered to be a general reserve either on principle or on the provisions of the Companies Act. But this decision was neither noticed by the Full Bench nor by the Division Bench. But even if it is to be treated as a general reserve whether in view of the Explanation to r. 1 of the Second Schedule to the Surtax Act, it will have to be excluded for the purpose of computation of the capital is the question that will have to be directly decided in this case. But having regard to certain observations made in the Full Bench judgment, we feel that this issue is better decided by a Full Bench rather that by a Division Bench.

(3.) PURSUANT to this order of reference, the case came before a Full Bench of this court consisting of the Chief Justice, Sethuraman J. and M. A. Sathar Sayeed J. The Full Bench was of the view that certain observations contained in the Full Bench judgment of this court referred to above required reconsideration. In view of this, the Full Bench referred this case to a Fuller Bench by an order dated 1st December, 1980. That is how the case has come up for disposal before this Bench.