Case ID |
1a9bfd07-dfb4-4af5-bd31-781028c3fa70 |
Body |
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Case Number |
D-2741 of 2016 |
Decision Date |
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Hearing Date |
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Decision |
The Tribunal confirmed the AAC's order that the bonus reserve created by the assessee-company should not be excluded from the computation of capital. The amounts taken to the bonus reserve were found not to correlate with actual bonus payments made to employees. The Tribunal's decision was upheld based on the examination of the balance sheet, which showed that the bonus reserves had not been utilized for actual payments, leading to the conclusion that the bonus reserve could not be excluded from capital computation. The questions referred by the revenue were answered in favor of the assessee. |
Summary |
This case revolves around the interpretation of Rule 1(iii) of the Second Schedule to the Companies (Profits) Surtax Act, 1964, particularly concerning the computation of capital for assessment years 1971-72 and 1972-73. The issue at hand was whether amounts designated as 'bonus reserves' could be excluded from the computation of the assessee's capital. The Tribunal found that these reserves were not linked to actual bonus payments made to employees during the assessment years in question. The decision emphasized the need for reserves to reflect actual commitments for payment to be excluded from capital computation. The ruling reinforced the principle that reserves should be assessed based on their actual usage and correlation with payments. This case is significant for companies assessing their capital computation under the Surtax Act, ensuring compliance and accurate financial reporting. Key terms include 'bonus reserve', 'capital computation', 'Companies (Profits) Surtax Act', and 'income tax assessment'. |
Court |
Bombay High Court
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Entities Involved |
Automatic Electric (P.) Ltd.
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Judges |
S.K. Desai,
V.S. Kotwal
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Lawyers |
G.S. Jetley,
Mrs. Manjula Singh,
K.B. Bujle
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Petitioners |
Commissioner of Income Tax
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Respondents |
Automatic Electric (P.) Ltd.
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Citations |
1989 SLD 2298,
(1989) 176 ITR 295
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Other Citations |
CIT v. Ballarpur Industries Ltd. [1979] 116 ITR 528 (Bom.),
CIT v. Periakaramalai Tea & Produce Co. Ltd. [1973] 92 ITR 65(Ker.)
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Laws Involved |
Companies (Profits) Surtax Act, 1964
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Sections |
Rule 1(iii)
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