R.K. Abichandani, J.
1. The Income-tax Appellate Tribunal, Ahmedabad Bench 'C', has referred for the opinion of the High Court the following questions under the provisions of section 18 of the Companies (Profits) Surtax Act, 1964 (hereinafter referred to as 'the Act'), read with section 256(1) of the Income-tax Act, 1961 :
'1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that reserves was required to be deducted to the extent of Rs. 40,94,438 under the provisions of rule 1 of the Second Schedule to the Companies (Profits) Surtax Act, 1964?
2. Even if the reply to the above question is against the assessee, whether, on the facts and in the circumstances of the case, the above reduction was justified when the assessee had declared a dividend of Rs. 15,58,752 during the years in which the above excess of Rs. 40 lakhs arose?'
2. Regarding question No. 1, for the assessment year 1976-77, the Surtax Officer has made a computation of capital and worked out the standard deductions. He had deducted a sum of Rs. 40,94,438 on the ground that excess reserves to this extent had been created by debiting the depreciation to the profit and loss account on the straight line method instead of debiting the profit and loss account by the higher amount of depreciation, which had been allowed to the assessee under the prescribed rules. The Surtax Officer was of the view that the difference between the depreciation actually allowed in the income-tax assessments and the depreciation as provided amounting to Rs. 40,94,438 had resulted in excess reserves of the same amount which could not be taken into account for making the capital computation. The Surtax Officer thus, while computing the capital, deducted an amount of Rs. 40,94,438 as the excess depreciation allowed as per order and as per the amount debited to the profit and loss account, which according to him was not to be considered to be a part of the reserve. In doing so, he applied the Bombay High Court's decision in CIT v. Zenith Steel Pipes Ltd. : [1978]112ITR215(Bom) . The Commissioner of Income-tax (Appeals) and the Tribunal followed the same decision and upheld the order of the Surtax officer.
3. In the case of CIT v. Zenith Steel Popes Ltd. : [1978]112ITR215(Bom) the Bombay High Court has, inter alia, held that where the depreciation actually allowed in the assessment exceeds the depreciation provided in the books of the assessee-company, the amount of excess is to be deducted from the general reserves for the purpose of including the reserves in computing the capital for the purposes of surtax. The aforesaid decision of the Bombay High Court is affirmed by the Supreme Court in the case of Zenith Ltd. v. CIT : [1993]200ITR572(SC) .
4. In this view of the matter, question No. 1 is answered in the affirmative, in favour of the Revenue and against the assessee.
5. Regarding question No. 2, it was contended on behalf of the assessee that the depreciation difference should have been reduced by the amounts of dividend declared from the calendar year 1970 to the calendar year 1975 inclusive of totalling Rs. 15,58,752 which would have the effect of enhancing the capital computed for arriving at the quantum of standard deduction. The authorities have found that the assessee has not furnished any figures to show that had the assessee made proper provision towards depreciation as per the Income-tax Rules, the company's distributable profits would have been much less than the amount of dividend declared in any of the years from calendar year 1970 to 1975. It has been found that it was not the assessee's case that in any of these years, the dividends were paid out of the capital and not out of the profits. Which could have the effect of reducing the capital. Since the assessee had failed to furnish any figures which would show that the distributable profits of the company would have been much less than the amount of dividends actually declared in various years, if appropriate provisions towards depreciation allowable under the Rules had been made, we do not find any reason to take a different view of the matter on the factual aspect as fond by the Tribunal. Question No. 2 is, therefore, answered in the affirmative, in favour of the Revenue and against the assessee.
6. The reference stands disposed of accordingly with no order as to costs.