COMMISSIONER OF INCOME-TAX,BOMBAY CITY vs THE CENTURY SPINNING AND MANUFACTURING CO. LTD.THE CENTUR

The Supreme Court ruled that the sum of Rs. 5,08,637 carried over by the Century Spinning & Manufacturing Co. Ltd. was not a reserve under rule 2 of Schedule II to the Business Profits Tax Act, 1947, as it was earmarked for distribution as a dividend and not declared as a reserve. The Court held that since the amount was marked for distribution and actually distributed, it cannot be included in the company's capital for tax purposes. Additionally, profits from January 1 to April 1, 1946, were also not to be treated as reserves.