| Case ID |
675d98ed-fc23-49d0-a7e2-95a0331acfa7 |
| Body |
View case body. Login to View |
| Case Number |
IT REFERENCE No. 107 OF 1967 |
| Decision Date |
Aug 09, 1971 |
| Hearing Date |
|
| Decision |
The court held that the provisions for bonus, taxation, and proposed dividends are entitled to be treated as 'reserves' under the Second Schedule of the Super Profits Tax Act, 1963. The Income-tax Appellate Tribunal's decision to include these provisions in the computation of the capital of the assessee was affirmed. The court emphasized that reserves must be specifically kept apart for future use and established that the provisions in question were indeed reserves since they represented amounts set aside for future liabilities, not for already arisen liabilities. The decision ultimately favored the assessee, allowing the appeal and affirming the classification of the provisions as reserves. |
| Summary |
In the landmark case of IT REFERENCE No. 107 OF 1967, the Allahabad High Court addressed the complex issue of reserve classification under the Super Profits Tax Act, 1963. The critical question was whether provisions for bonus, taxation, and proposed dividends could be classified as reserves for capital computation purposes. The court's ruling clarified the definition of 'reserve,' emphasizing that it must be a sum specifically allocated for future use. The case highlights the importance of accurate financial reporting and compliance with tax regulations, offering valuable insights for businesses and tax advisors alike. This decision reinforces the principle that provisions set aside for anticipated liabilities should not be dismissed as mere contingent liabilities but recognized as legitimate reserves that contribute to a company's capital structure. The ruling is significant for corporate financial practices, ensuring that similar provisions are adequately accounted for in future assessments. |
| Court |
Allahabad High Court
|
| Entities Involved |
Not available
|
| Judges |
R.S. PATHAK,
H.N. SETH
|
| Lawyers |
B.L. Gupta,
Dr. R.R. Misra,
Rajesh Tandon,
Krishna Sai
|
| Petitioners |
Commissioner of Income Tax
|
| Respondents |
Security Printers of India (P.) Ltd.
|
| Citations |
1972 SLD 598,
(1972) 86 ITR 210
|
| Other Citations |
Aluminium Industries Ltd. v. CIT [1968] 68 ITR 125 (Ker.),
CIT v. Bank of Bihar Ltd. [1953] 24 ITR 9 (Pat.),
CIT v. Century Spg. & Mfg. Co. Ltd. [1953] 24 ITR 499; [1954] SCR 203 (SC),
CIT v. Standard Vacuum Oil Co. [1966] 59 ITR 685 (SC),
CIT & Business Profits Tax v. Vasantha Mills Ltd. [1957] 32 ITR 237 (Mad.),
First National City Bank v. CIT [1961] 42 ITR 17; 3 SCR 371 (SC),
Indian Steel and Wire Products Ltd. v. CIT [1958] 33 ITR 579 (Cal.)
|
| Laws Involved |
Super Profits Tax Act, 1963
|
| Sections |
Not available
|