COMMISSIONER OF INCOME TAX Vs. MARRIOR INDIA LIMITED

JUDGEMENT

(1.) THE question referred to us for determination is under :

(2.) THIS question is raised in relation to computation of capital for the purpose of surtax for the asst. yrs. 1970 71 and 1971 72. So far as the asst. year 1970 71 is concerned, the computation of capital has to be made as on 1st June, 1968, for the purpose of this case. The balance sheet of the company as on 31st May, 1968, shows that in the item, general reserve under the heading "Reserves and surplus" initially at the beginning of that year there was a balance of Rs. 4,81,501. Out of the profits during the year ending 31st May, 1968, the sum of Rs. 2,44,000 was directed to be appropriated by transfer to general reserve. In the same year, i.e., 31st May, 1968, the directors recommended that the sum of Rs. 2,10,000 should be paid as final dividend, if approved by the shareholders at the annual general meeting to be held on 30th Sept., 1968, and the same should be paid out of the general reserve. For this asst. year 1970 71, the question ,irises whether this sum of Rs. 2,10,000 forming part of the general reserve is includible in the capital of the company for the purpose of surtax. For the asst. year 1971 72, the relevant date for computation of the capital is 1st Dec., 1969. The position shown by the balance sheet as on 30th Nov., 1969, is that at the beginning of that year a sum of Rs. 5,15,501 was standing to the credit of the general reserve. Out of the profits of 18 months ending on 30th Nov., 1969, a sum of Rs. 5,78,000 was directed by the directors to be appropriated by transfer to the general reserve. For the period ending 30th Nov., 1969, the directors recommended that a total dividend of Rs. 2,25,000 be paid and such dividend, if approved by the shareholders at the annual general meeting to be held on 25th March, 1970, was to be paid out of general reserve. Thus, for these years the question is whether the sum of Rs. 2,25,000 directed to be paid as final dividend in respect of the period ending on 30th Nov., 1969, is includible for computation of the capital for the purpose of surtax.

(3.) THERE will be no order as to costs.