AJIT SINGH BAINS,J. - (1.) THE judgment will dispose of I. T. R. No. 6 of 1974 and I. T. Ref. No. 7 of 1974, as both these references arise out of the same facts. The questions of law referred by the Income-tax Appellate Tribunal (hereinafter called " the Tribunal"), in these references, are recapitulated below: Question arising out of the assessee's application : " Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the amount of Rs. 8 lakhs did not form part of the reserves as on April 1, 1962, for purposes of computation of capital under Rule 1 of the Second Schedule to the Super Profits Tax Act, 1963 ?" Questions arising out of the Commissioner's application : " 1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in allowing the additional ground to be raised for the first time before it ? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the amounts of Rs. 71,808 and Rs. 1,24,974, respectively, for ' provision for taxation ' and ' provision for dividends ' could be treated as ' reserve ' to be included in the computation of the assessee's capital under Rule 1 of the Second Schedule to the Super Profits Tax Act, 1963 ? "
(2.) THE facts giving rise to these references are that the assessee is a company and for the assessment year 1963-64, the previous year is 1962-63, commencing from 1st April, 1962, and ending on 31st March, 1963. The dispute relates to the computation of capital under r. 1 of the Second Schedule to the S. P. T. Act, 1963 (hereinafter called "the Act " ). The computation of capital is provided in this Act and an assessee gets a standard deduction at the rate of 6% of the capital computed or Rs. 50,000 whichever is greater from the " chargeable profits ". This Act was in force only for the assessment year 1963-64 and was later on substituted by the C. (P.) S. T. Act, 1964. Under r. 1 of the Second Schedule of the Act, capital was to be computed as on the first day of the previous year, i. e. , the 1st April, 1962. In the balance-sheet of the assessee-company as on 31st March, 1962, there was an item of Rs. 8,19,455 being the credit balance of " profit & loss account " and this was shown under the head " Reserve and surplus ". Admittedly, no part of this amount was transferred to any reserve account in the books of the company during the accounting year ending on March 31, 1962. A resolution was passed by the shareholders on 29th September, 1962, to the following effect : " Further resolved that a sum of Rs. 8,00,000 out of accumulated profits be and is hereby transferred to general reserve. " On this basis, the assessee claimed before the ITO that Rs, 8 lakhs should be considered as a part of the reserves as on 1st April, 1962. The ITO rejected this contention. Dissatisfied by the order of the ITO, the assessee filed an appeal before the AAC which also met the same fate. The assessee further appealed to the Tribunal but with no success. Hence, the aforementioned question on the assessee's application.
(3.) DURING the course of appeal the assessee sought permission to raise an additional ground of appeal which is in the following terms : "that the amount of Rs. 1,24,974 standing under the head 'provision for Dividend' and Rs. 71,808 standing under the head 'provision for Taxes' may be considered as a part of capital employed in the business under Rule 1 of the Second Schedule of the S. P. T. Act, 1963. " ;