NAGAM JAL MILLS LIMITED Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE assessee is a public limited company engaged in the manufacture and sale of cotton yarn. In the year ending on 30th April, 1961, it made a profit of Rs. 9,91,092. THE balance of profit brought forward from the earlier year was Rs. 2,12,352. THE board of directors in their report dated November 12, 1961, to the shareholders recommended the following appropriations for the year. <FRM>JUDGEMENT_387_ITR94_1974Html1.htm</FRM>

(2.) THIS left a balance of Rs. 99,759 which was carried forward to the next year. In computing the capital base as on May 1, 1961, under Rule 1 to the 2nd Schedule to the Super Profits Tax Act, the assessee claimed that the following sums should be treated as reserves : <FRM>JUDGEMENT_387_ITR94_1974Html2.htm</FRM>

(3.) AT the instance of the assessee the following question has been referred to this court in T.C. No. 260 of 1967 :