| Case ID |
4395228c-08e8-44ef-b500-20bd5ea244a1 |
| Body |
View case body. Login to View |
| Case Number |
IT REFERENCE Nos. 314, 314A TO 314D OF 1975 |
| Decision Date |
Oct 30, 1985 |
| Hearing Date |
|
| Decision |
The Tribunal was justified in accepting the assessee's claim that the doubtful debts reserve and deferred taxation reserve should be included in the computation of the assessee's capital. The court found that the reserves did not meet a known or existing liability, thus classifying them as reserves rather than provisions. Therefore, both the deferred taxation reserve and the doubtful debts reserve were includible in the computation of the capital as per the provisions of the Companies (Profits) Surtax Act, 1964. |
| Summary |
This case revolves around the interpretation of capital computation under the Companies (Profits) Surtax Act, 1964. The Bombay High Court examined whether the doubtful debts reserve and deferred taxation reserve should be included in the computation of the assessee's capital. The court emphasized that reserves established without any specific known liabilities could be included in capital computation. The decision followed previous judgments that distinguished between reserves and provisions, highlighting the nature of appropriations made ad hoc. This ruling reinforces the importance of understanding the nature of reserves in corporate finance and tax law, ensuring that companies accurately report their financial standing. Keywords: Companies Surtax, Capital Computation, Tax Law, Bombay High Court, Doubtful Debts, Deferred Taxation, Reserves vs Provisions. |
| Court |
Bombay High Court
|
| Entities Involved |
Commissioner of Income Tax,
Ruston & Hornsby India (P.) Ltd.
|
| Judges |
M.H. Kania, ACTG. C.J.,
S.P. Bharucha, J.
|
| Lawyers |
G.S. Jetly and Miss S.G. Shah for the Applicant,
B.D. Damodar for the Respondent
|
| Petitioners |
Commissioner of Income Tax
|
| Respondents |
Ruston & Hornsby India (P.) Ltd.
|
| Citations |
1986 SLD 1739,
(1986) 160 ITR 712
|
| Other Citations |
Vazir Sultan Tobacco Co. Ltd. v. CIT [1981] 132 ITR 559 (SC),
CIT v. Hindustan Lever Ltd. [IT Reference No. 51 (Bom.) of 1975, dated 2-9-1985],
Goodlass Nerolac Paints Ltd. v. CIT [1984] 150 ITR 484 (Bom.)
|
| Laws Involved |
Companies (Profits) Surtax Act, 1964
|
| Sections |
Not available
|