Chakravartti, C.J. - (1.) This is a reference under Section 66(1), Income-tax Act, read with Section 19, Business Profits Tax Act, of a single question of law at the instance of the Commissioner of Income-tax, West Bengal. The reference came up for hearing on a previous occasion -- on 4-5-1953, to be-precise -- when further hearing was adjourned on the ground that the identical point was pending consideration by the Supreme Court in an appeal from Bombay. An opportunity, however, was taken to reframe the question of law because it was felt that the basis on which the specific sum had been chosen was not clear and if the answer of the Court was limited to that sum, the opinion given on the question might mislead rather than guide. The real controversy between the parties, it was admitted, was whether the undistributed profits of any particular year carried forward to the first day of the chargeable accounting period next following, could be treated as a reserve and added to the paid up share, capital for the purposes of Rule 2(1) of Schedule II to the Business profits Tax Act, provided, however, such profits had been assessed to tax under the Income-tax Act. In order to reflect that controversy between the oarties more truly, the question was reframed in form agreed to by all the parties.
(2.) This particular reference is singularly bare facts. All that we know is that the relevant rgeable accounting period is the period comncing on 1-4-1946, and ending on 31-3-1947. The (sic) ssee is a limited company and its Profit and ss account, as on 31-3-1945, showed an undistributed balance of Rs. 7,90,543-0-5. It was that sum .and the whole of that sum which the assessee wanted to be taken into the computation of its capital as a reserve and the Tribunal allowed the claim on the ground that there was virtually no difference between amounts classified as reserves and undistributed net profits, carried forward The Commissioner Of Income-tax was dissatisfied with the decision, and required the Tribunal to refer the matter to this Court. Accordingly, the following question was referred : "Whether upon a correct interpretation of Rule 2(1) of Schedule II of the Business Profits Tax Act, 1947, Rs. 7,90,543-0-5 undistributed profits carried forward to the next year should be considered as a part of the 'reserve' and be added to capital.'
(3.) For the reasons given in our order, dated 4-5-1953, the question referred was reframed in the following form with the consent of all parties: "Whether upon a correct interpretation of Rule 2(1) of Schedule II of the Business Profits Tax Act, undistributed profits carried forward to the first day of the chargeable accounting period should be considered as a part of the 'reserve' and be added to capital, so far as they have not been allowed in computing the profits of the company for the purposes of the Indian Income-tax Act, 1922.";