HINDUSTAN FERODO LIMITED Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE present application relates to the assessment years 1972 -73 and 1973 -74. For the assessment year 1972 -73, the relevant previous year ended on March 31, 1972, while for the assessment year 1973 -74, the relevant previous year ended on March 31, 1973. The questions which are before us relate to the computation of capital for the purposes of the Companies (Profits) Surtax Act, 1964, as on April 1, 1971, for the assessment year 1972 -73 and as on April 1, 1972, for the assessment year 1973 -74. The questions which are referred to us are as follows :

(2.) FOR the assessment year 1972 -73, the general reserves as on April 1, 1971, were shown by the assessee -company as Rs. 1,30,45,216. The general reserves shown by the company as on April 1, 1972 (for the assessment year 1973 -74) were Rs. 1,22,53,216. For the assessment year 1972 -73, the company declared a dividend of Rs. 32,26,214 on September 17, 1971, at its annual general meeting. As the company was subsidiary of Turner and Newall Ltd., a U. K. company, the shareholders were non -residents. Under section 9(1) (g) of the Foreign Exchange Regulation Act, 1973, permission of the Reserve Bank of India was required for payment of the dividend so declared to the non -resident shareholders. The permission of the Reserve Bank was so obtained for payment of the Dividend declared on September 17, 1971, in the next month on October 13, 1971.

(3.) THE question is whether the general reserves of the company as on April 1, 1971, and April 1, 1972, are to be reduced by the dividend declared on September 13, 1971, and September 15, 1972, respectively, for the assessment years in question.