JUDGMENT
Kantawala, C.J.
1. The following two questions are referred for our determination :
“Assessment year 1965-66:
Whether, on the facts and in the circumstances of the case, the dividend reserve of Rs. 17,25,000 as on July 1, 1963, was includible in the computation of capita] of the assessee under Rule 1 of the Second Schedule to the Companies (Profits) Surtax Act, 1964, for the assessment year 1965-66 ? Assessment year 1966-67 :
Whether, on the facts and in the circumstances of the case, the general reserve to the extent of Rs. 18,35,715 as on July 1, 1964, was includible in the computation of capital of the assessee-company under Rule 1 of the Second Schedule to the Companies (Profits) Surtax Act, 1964, for the assessment year 1966-67 ?”
2. So far as this reference is concerned, the facts need not be stated because the principles on the basis of which the questions are to be answered have been fully laid down in more than one decision of our court decided to-day and few days earlier.
3. For the assessment year 1965-66, the crucial date is July 1, 1963. It is clear from the balance-sheet and profit and loss account for the year ending June 30, 1963, that the sum of Rs. 17,25,000 is appropriated from the current profits to the dividend reserve account and out of that the sum of Rs. 17,15,715 is directed to be paid as dividend in the same year, Thus, the sum of Rs. 17,15,715 which is proposed dividend will not be includible in the computation of capital and only the balance of Rs. 9,285 will be treated as capital for the purpose of the Surtax Act. Therefore, our answer to question No. 1 is that out of an amount of Rs: 17,25,000 the sum of Rs. 9,285 as on July 1, 1963, was includible in the computation of capital for the assessment year 1965-66 under rule 1 of the Second Schedule to the Companies (Profits) Surtax Act, 1964.
4. So far as assessment year 1966-67, is concerned, instead of transferring
the amount to the dividend reserve, the amount of Rs. 25,00,000 was trans
ferred to the general reserve and the sum of Rs. 18,35,715 was directed to
be paid as dividend for the same year from the amount standing to the
credit of the general reserve. It is clear that the nomenclature given to an
account is not conclusive. The sum of Rs. 18,35,715 was the proposed
dividend in relation to the year ending June 30, 1964, and it is not includi
ble in the computation of capital of the assessee-company. Thus, our
answer to question No. 2 is that the general reserve to the extent of
Rs. 18,35,715 as on July 1, 1964, was not includible in the computation of
capital of the assessee-company but the sum of Rs. 6,64,285 as on July 1,
1964, was includible in the computation of capital of the assessee-company
under rule 1 of the Second Schedule to the Companies (Profits) Surtax Act,
1964, for the assessment year 1966-67.
5. Each party will bear its own costs of the reference.
