SOUTHERN ROADWAYS LIMITED, SUCCESSORS-IN-INTEREST SOUTHERN ROADWAYS (PRIVATE) LTD. Vs. THE ASSISTANT COMMISSIONER, URBAN LAND TAX

JUDGEMENT

(1.) The Income-tax Appellate Tribunal, Madras Bench, under section 256 (1) of the Income-tax Act, 1961, has referred the following question for the opinion of this court :

(2.) The matter lies within a very narrow compass and it concerns the questions as to what constitutes, "reserve" as contemplated by Paragraph 1 of Schedule II of the Super Profits Tax Act, 1963 (hereinafter called "the Act").

(3.) The assessee is a public limited company registered under the companies Act and is running a composite spinning and weaving mills at Mettur Dam, Salem District. Before the Income-tax Officer, certain amounts under various heads had been claimed as reserve for the purposes of computation of capital besides the opening share capital of Rs. 60,00,000. The Income-tax Officer was of the view that only general reserve, raw material fluctuation and assests replacement reserve were in the nature of reserves to qualify as reserves for inclusion in the capital. According to him, credit balance in profit and loss account, advertisement reserve, reserve for bonus, reserve for tax, reserve for gratuity and proposes dividends would not fall under "reserve". On appeal preferred by the assessee the Appellate Assistant Commissioner held against the assessee with regard to reserve for proposed dividends, reserve for taxation, reserve for gratuity and reserve for bonus. On further appeal to the Tribunal, the Tribunal also held that the three amounts involved in the question, namely, the provision for tax liability of Rs. 15,50,000 the provision for payment of gratuity to employees of Rs. 1,36,060 and provision for payment of bonus to employees of Rs. 5,69,000 cannot be said to be reserves within the scope of Paragraph 1 of Schedule Ii of the Act. It is the correctness of this conclusion in the present reference in the form of the question extracted above.