| Case ID |
09b77646-be30-40d5-b19a-34a6c4bcfe4a |
| Body |
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| Case Number |
IT REFERENCE No. 3 OF 1969 |
| Decision Date |
Jun 28, 1976 |
| Hearing Date |
|
| Decision |
The court held that the amount standing in the provision for taxation account as of December 31, 1961, was not includible in computing the capital of the company for the purposes of the Super Profits Tax Act, 1963. However, the amount standing in the proposed dividend account was includible. The case was decided partly in favor of the assessee and partly in favor of the revenue. The distinction between provisions and reserves was emphasized, with provisions meeting existing liabilities and reserves being set aside for future purposes. |
| Summary |
In the landmark case of 'Commissioner of Income Tax v. Mafatlal Chandulal & Co. Ltd.', the Gujarat High Court addressed critical issues regarding the treatment of provisions and reserves under the Super Profits Tax Act, 1963. The central question revolved around whether amounts set aside for taxation and proposed dividends should be included in the computation of the capital of the company. The court clarified the definitions and implications of provisions versus reserves, asserting that provisions are intended for known liabilities, while reserves are for future contingencies. This distinction is vital for companies as it directly impacts their taxable profits and capital computations. The ruling underscores the importance of accurate accounting practices and compliance with tax regulations, particularly in the context of corporate finance and taxation law. Keywords such as 'Super Profits Tax Act', 'provisions', 'reserves', and 'corporate tax law' are integral to understanding the implications of this case on future tax assessments and corporate financial practices. |
| Court |
Gujarat High Court
|
| Entities Involved |
Mafatlal Chandulal & Co. Ltd.
|
| Judges |
B.J. Divan, C.J.,
P.D. Desai, J.
|
| Lawyers |
J.M. Thakore,
R.P. Bhatt,
K.H. Kaji
|
| Petitioners |
Commissioner of Income Tax
|
| Respondents |
Mafatlal Chandulal & Co. Ltd.
|
| Citations |
1977 SLD 1067,
(1977) 107 ITR 489
|
| Other Citations |
Aluminium Industries Ltd. v CIT [1968] ITR 125 (Ker.),
Bombay Dyeing & Mfg. Co. Ltd. v. CWT [1974] 94 ITR 603 (SC),
CIT v. Aryodaya Ginning and Mfg. Co. Ltd. [1957] 31 ITR 145 (Bom.),
CIT v. Bank of Bihar Ltd. [1953] 24 ITR 9 (Pat.),
CIT v. British India Corporation (P.) Ltd. [1973] 92 ITR 38 (All.),
CIT v. Century Spg. & Mfg. Ltd. [1951] 20 ITR 260 (Bom.),
CIT v. Hind Lamps Ltd. [1973] ITR 487 (All.),
CIT v. Indian Steel Rolling Mills Ltd. [1973] 92 ITR 78 (Mad.),
CIT v. Mysore Electrical Industries Ltd. [1971] 80 ITR 566 (SC),
CIT v. Peria Karamalai Tea and Produce Co. Ltd. [1973] 92 ITR 65 (Ker.),
CIT v. Rohit Mills Ltd. [1965] 58 ITR 854 (Guj.),
CIT v. Security Printers of India (P.) Ltd. [1972] 86 ITR 210 (All.),
CIT v. Standard Vacuum Oil Co. [1966] 59 ITR 685 (SC),
CIT v. Vasantha Mills Ltd. [1957] 32 ITR 237 (Mad.),
Fidelity Title and Trust Co. v. United States (66 ED 953),
First National City Bank v. CIT [1961] 42 ITR 17 (SC),
Indian Steel & Wire Products Ltd. v. CIT [1955] 27 ITR 436 (Cal.),
Indian Steel & Wire Products Ltd. v. CIT [1958] 33 ITR 579 (Cal.),
Standard Mills Co. Ltd. v. CWT [1967] 63 ITR 470 (SC)
|
| Laws Involved |
Super Profits Tax Act, 1963
|
| Sections |
Rule 1, Schedule I
|