K.L.Roy, J. - (1.) This is a composite reference under Section 66(1) of the Indian Income-tax Act, 1922, by the Income-tax Appellate Tribunal, Calcutta, to this court whereby a consolidated statement of the case has been submitted in response to applications by both the Commissioner and the assessee. The assessee is M/s. Tea Estates India Private Ltd. and the assessment year concerned is 1956-57, the corresponding accounting year ending on the 30th June, 1955. The assessee held 52,350 shares out of the total issued shares of 54,600 in M/s. Dibru Darrang Tea Company Ltd. (hereinafter referred to as "D.D.T. Co.") and 22,998 shares out of the total issued shares of 23,000 in M/s. Taikrong Tea Company Ltd. (hereinafter referred to as "T.T. Co."). The latter two companies were tea companies growing, manufacturing and selling tea for which purpose they owned large tea estates containing land, buildings, plant, machinery, etc. On the 11th August, 1947, the two tea companies sold their entire tea estates, including all the assets, to M/s. Brooke Bond Estates India Ltd., and on such sales D.D.T. Co. received a surplus of Rs. 17,18,061 over the book value of its assets and T.T. Co. similarly received a surplus of Rs. 13,11,339 over the book value of its assets. Of these figures the amounts relating to the lands of the tea estates of the two companies were Rs. 19,30,374 and Rs. 10,11,216, respectively. It would thus appear that on the sale of its other assets D.D.T. Co. realised Rs. 2,12,313 less than their book value. It should be mentioned here that in 1936 the two tea companies revalued their assets and on such revaluation the book value of the assets of D.D.T. Co. were appreciated by an amount of Rs. 15,69,828 and of T.T. Co. by Rs. 58,772 Which were carried to the respective reserves of the two companies created on such writing up of the value of the assets. On the 29th October, 1954, the said two tea companies went into voluntary liquidation. On such liquidation the assessee became entitled to receive Rs. 57,69,186 out of the total distributable surplus of Rs. 58,81,273 of M/s. D.D.T. Co. and of Rs. 36,53,443 of M/s. T.T. Co. During the relevant accounting period the assessee received from the liquidators of the two tea companies the sums of Rs. 52,23,786 and Rs. 34,15,500 (Total Rs. 86,39,286), respectively.
(2.) The Income-tax Officer rejected the assessee's claim that, apart from the sum of Rs. 2,47,921, which was assessed as capital gains under Section 12B on T.T. Co. for the assessment year 1949-50, no other amount should be included in the computation of accumulated profits available for distribution within the meaning of Section 2(6A)(c) of the Act. The Income-tax Officer only allowed a deduction of Rs. 27,300 being payment on share premium account and included the balance of Rs. 86,11,986 (grossed up to Rs. 91,64,075) as the assessee's dividend income under Section 2(6A)(c).
(3.) On appeal, the Appellate Assistant Commissioner allowed a further deduction of Rs. 1,77,964 representing pre-incorporation advances in the case of T.T. Co. but rejected all the other contentions of the assessee including the contention that 60% of the amounts appearing under the head "balance of appropriation account" in the balance-sheets as also the general reserves and liabilities for taxation appearing in the books of the two tea companies should be excluded from the computation of accumulated profits.;