Sabyasachi Mukharji, J. - (1.) In this reference, Under Section 256(2) of the I.T. Act, 1961, as directed by this court, the Tribunal has referred the following two questions : " 1. Whether, on the facts and circumstances of the case, the Tribunal was justified in rejecting the claim of the assessee that Rs. 25,38,694, the balance in ' surplus' account represented ' reserve ' for the purpose of the Act ? Whether, on the facts and in the circumstances of the case, the Tribunal was justified in rejecting the claim (of the assessee), that Rs. 25,88,011 the balance in ' surplus' account represented 'reserve ' for the purpose of the Act ? "
(2.) The first question relates to the assessment year 1963-64, and the second one relates to the assessment year 1964-65. The assessment years involved, as we have mentioned, were two years, viz., the assessment years 1963-64 and 1964-65, for which the relevant accounting years were ended on December 31, 1962, and December 31, 1963, respectively. It appears that on the first day of the accounting year relevant to the assessment year 1963-64, there was a sum of Rs. 25,38,694 shown as surplus in the balance-sheet of the assessee. It would be relevant to set out the balance-sheet as on December 31, 1962, on the reserve and surplus items, which read as follows: JUDGEMENT_542_ITR141_1983Html1.htm
(3.) In the directors' report to the shareholders presenting the statement of account for the year ended December 31, 1962, the directors had observed as follows : " Reserves and surplus. The development rebate reserve has been increased by a further Rs. 3,00,000 and now totals Rs. 74,50,000. General reserve has been increased by Rs. 20,00,000. ";