SIEMENS INDIA LIMITED Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) BY this reference under S. 256(1) of the IT Act, 1961, r/w S. 18 of the Companies (Profits) Surtax Act, 1964, the Tribunal has referred the following three questions of law at the instance of the assessee :

(2.) SO far as the first question is concerned, it is stated by the counsel for the parties, that the issue involved in the said question is covered by the decision of the Supreme Court in Indian Tube Co. Ltd. vs. CIT (1992) 101 CTR (SC) 446 : (1992) 194 ITR 102 (SC). In that view of the matter, following the above decision of the Supreme Court, we answer the first question referred to us in the affirmative that is against the assessee and in favour of the Revenue. We are now left with the remaining two questions and we shall, therefore, set out only those facts which are relevant for determination of these two questions.

(3.) THE assessee preferred appeal before the AAC. The AAC did not accept the contention of the assessee that it should be treated as "paid up share capital"within the meaning of r. 1(i) or "reserve"within the meaning of r. 1(iii) of the Second Schedule to the Companies (Profits) Surtax Act, 1964 (Surtax Act). He, however, permitted pro rata capital adjustments on account of increase in capital under r. 3 of the Second Schedule to the Surtax Act w.e.f. 26th March, 1971 that is the day subsequent to the date of the allotment of the said shares became effective in favour of M/s Siemens Asia Investments. The Revenue did not challenge the later part of the order permitting pro rata capital adjustment. It has, therefore, become final. The assessee, however, went in appeal before the Tribunal against the order of the AAC in so far as it relates to the rejection of its other two contentions.