Sen, J. - (1.) This reference under Section 256(1) of the I.T. Act, 1961, at the instance of the Commissioner of I.T. and S.P.T., West Bengal-III, arises out of the assessment of Messrs. Eyre Smelting Private Ltd., Calcutta, the assessee, to super profits tax in the assessment year 1963-64, the relevant accounting period being the calendar year ended on the 31st December, 1962.
(2.) The facts found and/or admitted are, inter alia, that in the relevant period the assessee made a provision in its accounts for bad and doubtful debts aggregating to Rs. 1,02,239, respectively, under two separate heads, namely, "Debts outstanding for a period exceeding six months, and considered doubtful" under which a sum of Rs. 39,416.19 was provided and also "Advances recoverable in cash or in kind or value to be received unsecured and considered doubtful" the amount provided hereunder being Rs. 62,721 as on the 1st January, 1962, In its assessment to super profits tax the assessee claimed that the said sum of Rs. 1,02,239 should, be considered as "reserve" and included in the computation of its capital under the Second Schedule to the S.P.T. Act, 1963. The ITO did not accept the assessee's contention and did not include the said amount in the computation of capital.
(3.) On appeal, the AAC applied what he understood to be the principle laid down in a decision of this court in the case of Indian Steel and Wife Products Ltd. v. CIT [1958] 33 ITR 579 (Cal) and held that a technical meaning should be given to the word "reserve" which in the case before him applied to the fund in question.;