UNITED NILGIRI TEA ESTATES COMPANY LIMITED Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) FOR the assessment year 1962-63 corresponding to the previous year ended March 31, 1962, the assessee which is a public limited company claimed deduction of the following reserves as on March 31, 1972, for determining the capital base for the purpose of the Super Profits Tax Act, 1963 : <FRM>JUDGEMENT_734_ITR96_1974Html1.htm</FRM>

(2.) THE Super Profits Tax Officer by his order dated January 31, 1964, refused to allow the claim as in his view the provision for taxation and proposed dividends were not reserves within the meaning of the Act and the question of allowing the excess depreciation did not arise as it was transferred to the general reserve only after 31st March, 1963.

(3.) AS regards the amount in credit of the depreciation reserve account in excess of the amount allowed for tax purpose, it is seen that it is part of the amount set apart as provision for depreciation. Though a provision for depreciation was not actually considered in Nagammal Mills Ltd. v. Commissioner of Income-tax, the reasoning given there in relation to the excess development rebate will equally apply here. Dealing with the provision for development rebate it has been held, that, as it has been utilised by the company for its business purpose, it should be treated as a reserve within the meaning of Rule 1 of Schedule 2 of the Act Following that view, we have to hold that the sum of Rs. 1,31,000 which is found to be excess of the amount of depreciation allowed for tax purposes has to be treated as a reserve for the purpose of the Super Profits Tax Act, 1963. The question referred is, therefore, answered accordingly. There will be no order as to costs.