COMMISSIONER OF INCOME TAX Vs. ANDHRA BANK LIMITED

JUDGEMENT

(1.) This reference arises under section 18 of the Companies (Profits) Surtax act, 1964, read with section 256(1) of the Income-tax Act, 1961. The matter relates to surtax assessment year 1973-74. At the instance of the Commissioner of Income-tax, the following three question of law are referred for the opinion of this court :

(2.) Learned standing counsel for the Revenue and learned counsel for the assessee are heard. It is represented that the first question above mentioned is covered against the assessee by a judgment of this court in the assessees case in Referred Case No. 117 of 1978 dated 22/02/1984 (CIT v. Andhra Bank Ltd. [1985] 153 ITR 4). The question is accordingly answered in the negative, that is to say, in favour of the Revenue and against the assessee.

(3.) So far at the second question is concerned, it is stated that the assessee provided a reserve of Rs. 2,37,085 for purpose of taxation. It is admitted that this provision is in excess of the requirement for payment of taxes. Any reserve for taxation in excess of the actual requirement will have to be treated as reserve for purpose of computation of capital under the Companies (Profits) Surtax Act. This principle is clearly set out by the Supreme Court in Vazir Sultan Tobacco Co., Ltd. v. CIT [1981] 132 ITR 559. In the circumstances, the Tribunal was correct in holding that the sum of Rs. 2,37,085 constituted a reserve for purposes of computing the capital under the Surtax Act. We, accordingly, answer the second question in the affirmative, that is so say, in favour of the assessee and against the Revenue.