COMMISSIONER OF INCOME TAX Vs. JAWAHAR MILLS LIMITED

JUDGEMENT

(1.) AT the instance of the Department, the Tribunal referred the following question for the opinion of this court under section 256(1) of the Income-tax Act, 1961, read with section 18 of the Companies (Profits) Surtax Act, 1964 :

(2.) THE assessee is a public limited company and the assessment year involved is 1979-80 for which the accounting year ended on December 31, 1978. THE Surtax Officer, while computing the statutory allowance, reduced the capital employed to the extent of Rs. 10 lakhs which represented "preference share redemption reserve" on the view that such reserve was earmarked for a known liability, namely, redemption of preference shares of the company, and as such the reserve was in the nature of a provision which has to be excluded from the capital computation.

(3.) THE Andhra Pradesh High Court also had an occasion to consider the question of similar nature in the case of CIT v. Vazir Sultan Tobacco Co. Ltd , wherein, it was held as under :