COMMISSIONER OF INCOME TAX Vs. ARIES ADVERTISING PRIVATE LIMITED

JUDGEMENT

(1.) THE referred question is whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the sum of Rs. 1,77,186 being credit balances written off and transferred to the assessee's general reserve account was not income of the assessee chargeable to income-tax ?

(2.) A few facts first :

(3.) WE have gone through the judgment ourselves. WE find that in the facts of the present case, the said judgment will not apply. In that judgment, the asses-see had been treating the said amount outstanding against it and its nature of the liability also reflected in the balance-sheet. Such is not the case here. Instead, the assessee here has not treated the said amount as a liability and more particularly a continuing liability. On the other hand, the assessee has transferred this amount to the general reserve. It is trite law that any amount transferred to the general reserve would be out of the profits alone. The term "reserve" in contradistinction with the term "provision" has been clarified by the apex court in the case of Vazir Sultan Tobacco Co. Ltd. v. CIT [1981] 132 ITR 559. The apex court therein observed that (headnote):