Desai, J.:— In our opinion, both these references can be disposed of by a common order. The assessee in both the matters, who is the respondent, is Asian Paints (India) Pvt. Ltd. In Income-tax Reference No. 97 of 1972, we are concerned with the computation of super profits tax for the assessment year 1963-64. In Income-tax Reference No. 102 of 1972, we are concerned with the computation of surtax for the assessment years 1964-65 and 1965-66. In both the references the question which is required to be considered is whether the identical amount of Rs. 1,70,000 shown in the balance-sheet of the company as “gratuity reserve” in all the three assessment years under consideration would be a reserve and hence includible in the computation of capital or not.
2. The questions referred to us may now be set out. In Income-tax Reference No. 97 of 1972, the following question stands referred to us:
“Whether, on the facts and in the circumstances of the case, the ‘gratuity reserve’ shown in the balance-sheet of the company in the amount of Rs. 1,70,000 is includible in the computation of capital as on 1st January, 1962, in terms of rule 1 of the Second Schedule to the Super Profits Tax Act, 1963, for the assessment year 1962-63?”
3. Similarly, in Income-tax Reference No. 102 of 1972, the following question stands referred to us:
“Whether, on the facts and in the circumstances of the case, the ‘gratuity reserve’ shown in the balance-sheet of the company in the amount of Rs. 1,70,000 is includible in the computation of capital as on 1st January, 1963, and as on 1st January, 1964, in terms of rule 1 of the Second Schedule to the Companies (Profits) Surtax Act, 1964, for the assessment years 1963-64 and 1964-65?”
4. In its rather cryptic order, which is reproduced in the statement of the case, the Tribunal has stated that it follows its decision in S.P.T Appeal No. 50 of 1967-68.
5. We are informed at the Bar that that was an appeal concerning Bombay Tyres International Ltd. (originally Firestone Tyre & Rubber Co. of India Ltd.), in which matter a reference was made to the High Court, which reference we have concluded in favour of the assessee (Commissioner Of Income-Tax, v. Bombay Tyres International Bombay City-Ii Ltd., [1983] 141 ITR 710 (Appendix) (infra)).
6. From the fact that an identical amount was carried forward in all the three assessment years as “gratuity reserve”, it would appear that this was just setting apart in an ad hoc manner and without any correlation to the actual or estimated liability for the payment of gratuity. If that be so, then following our decision in CIT v. Forbes Forbes Campbell & Co. Ltd., [1977] 107 ITR 38 (Bom), we are required to hold that the sum would constitute a reserve and will be required to be included in the computation of capital on 1st January, 1962, 1st January, 1963, as also on 1st January, 1964.
7. Accordingly, both the questions are answered in the affirmative and in favour of the assessee.
8. Parties are directed to bear their own costs of the two references.