M/S. SUNDARAM CLAYTON LTD. vs COMMISSIONER OF INCOME TAX

The Supreme Court addressed the computation of capital under Rule 3 of Schedule II of the Companies (Profits) Surtax Act, 1964, in relation to a bonus share issue by M/s. Sundaram Clayton Ltd. The Court held that the amount capitalized for bonus shares must be included in the computation of capital for surtax purposes, affirming the Income Tax Appellate Tribunal's decision. The judgment clarified the interpretation of 'increase' in paid-up capital as it pertains to the Surtax Act, ensuring that such capitalizations are properly accounted for in tax assessments.