COMMISSIONER OF INCOME TAX Vs. CENTURY SPG AND MFG COMPANY LIMITED

JUDGEMENT

(1.) THE questions that are referred for our determination are as under :

(2.) THESE questions relate to the asst. year 1967 68, for which the previous year was the calendar year 1966. As questions Nos. 1 to 3 are already covered by the decisions in the earlier matters already disposed of, the facts necessary in respect of them need not be stated in detail. So far as the first question is concerned, on the first day of the previous year, i.e., on 1st Jan., 1966, the position of the dividend equalisation reserve was as under : A sum of Rs. 46,89,816 was already standing to the credit of the dividend equalisation reserve account on 1st Jan., 1966. From the profits of the year ending 31st Dec., 1965, a sum of Rs. 36,11,600 was transferred to the dividend equalisation reserve account with the result that after this transfer the total sum standing to the credit of the dividend equalisation reserve account was Rs. 83,01,416. The directors in their report recommended a sum of Rs. 66,38,589 to be distributed as dividend subject to it being approved by the shareholders at the annual general meeting. Such approval was granted and the amount was distributed. What part of the amount standing to the credit of the dividend equalisation reserve account in such a case should be included in the computation of capital under the Companies (Profits) Surtax Act, 1964 (hereinafter referred to as "the Act"), has been decided by us in CIT vs. Geoffrey Manners & Co. Ltd. (1977) 109 ITR 172 (Bom) and, following that decision, a sum of Rs. 46,89,816 has to be included in the computation of capital in accordance with the Second Schedule to the Act. Thus, our answer to question No. 1 is that a sum of Rs. 46,89,816 out of the amount standing to the credit of the dividend equalisation reserve account should be included in the computation of the capital under the Second Schedule to the Act. So far as question No. 2 is concerned, in view of our decision in Shree Ram Mills Ltd. vs. CIT (1977) 108 ITR 27 (Bom), question No. 2 should be answered in the negative, in favour of the Revenue and the amount of the proposed dividend ought not to be included in the computation of capital for the purposes of the Act.

(3.) SO far as question No. 4 is concerned, the relevant facts are as under :