COMMISSIONER OF INCOME TAX Vs. STEEL CONTAINERS LTD

JUDGEMENT

(1.) The Tribunal has referred the following question of law to this court under Section 256(1) of the Income-tax Act, 1961, read with Section 18 of the Companies (Profits) Surtax Act, 1964 :

(2.) Before the Appellate Tribunal, the Department contended that the dividend of Rs. 4,20,022 was declared at the annual general meeting of the company held on June 24, 1973, but, after the declaration, it would relate back to the first day of the previous year. For this, reliance was placed on the decision of the Supreme Court in the case of CIT v. Mysore Electrical Industries Ltd. [1971] 80 ITR 566 and thus submitted that dividend, though declared later became the liability on the last day of the previous year and hence, on the first day of the accounting period, it should be excluded from the general reserves. In addition, it was pointed out that the Appellate Assistant Commissioner committed an arithmetical error when he mentioned about the difference between Rs. 38,44,876 and Rs. 53,11.275. But, in fact, the difference was Rs. 34,24,854. This difference arose as the Appellate Assistant Commissioner did not see that the Income-tax Officer had separately taken the development rebate reserve in the computation of capital.

(3.) The Tribunal, after hearing the parties, held as under :