Holding

Explanation 1 to Rule 2 does not apply because the reserve was not created by creating or increasing a book asset, so the reserve forms part of the company’s capital for surtax purposes.

Summary

Mis. George Williamson (Assam) Ltd. acquired the Indian undertakings of twelve UK‑registered tea companies under a scheme of arrangement approved by the High Courts and the RBI, which required that the net assets of the acquired business not be depleted. The consideration paid (Rs 490 lakhs) was lower than the net asset value (Rs 633.89 lakhs), creating a capital reserve of Rs 143.89 lakhs shown in the balance sheet as "other reserve". The Revenue argued that, under Explanation 1 to Rule 2 of the Second Schedule to the Companies (Profits) Surtax Act, 1964, this reserve was not part of capital for surtax purposes, whereas the ITAT held it was capital and the High Court reversed that view. The Supreme Court examined the wording of Explanation 1, held that it applies only to reserves created by creating or increasing a book asset, and observed that the assets acquired were real, tangible assets, not book assets. Relying on the earlier decision in Commissioner of Income Tax v. Standard Vacuum Oil Co., the Court affirmed that the reserve must be included in capital, set aside the High Court judgment and restored the ITAT order. Consequently, the appeal was allowed and the appellant’s capital was deemed to include the reserve for surtax assessment.

Issues considered

Whether the High Court misinterpreted Explanation 1 to Rule 2 of the Second Schedule to the Companies (Profits) Surtax Act, 1964.
Whether Explanation 1 to Rule 2 is attracted in the present case involving a capital reserve arising from a shortfall between consideration paid and net asset value.
Whether the case is directly covered by the Supreme Court’s decision in Commissioner of Income Tax (Central) Calcutta v. Standard Vacuum Oil Co.

Legislation cited

Companies Acts. 391, s. 394
Companies (Profits) Surtax Act, 1964s. Second Schedule Rule 1(iii), s. Second Schedule Rule 2 Explanation 1
Foreign Exchange Regulation Act, 1973s. 19(l)(d)
Income Tax Act, 1922
Income Tax Act, 1961

Subjects

Companies (Profits) Surtax Actcapital reserveExplanation 1 Rule 2surtax assessmentscheme of arrangementRBI approvaltax liabilityStandard Vacuum Oil caseinterpretation of tax law

Judgment

MIS. GEORGE WILLIAMSON (ASSAM) LTD. A
v.
COMMISSIONER OF INCOME TAX, GAUHATI

SEPTEMBER 19, 2005

[DR. AR. LAKSHMANAN AND P.P. NAOLEKAR, JJ.] B

Companies (Profits) SurtaxAct, 1964-Second schedule, Rule J(iii) and
Rule 2 Explanation-Surtax-statutory deduction-Computation of capital of
a company, for the purpose ofsurtax assessment-Appellant company acquiring C
the Indian undertakings of UK registered companies in accordance with a
Scheme of Arrangement-RBI approving the price with the stipulation that
there should not be any depletion in the net assets on the date of acquisition
from that given in the balance sheets ofprevious year-Value of the net assets
maintained exceeded the price approved by RBI-The differential amount
shown by the company in its balance sheet as a capital reserve as part of D
other reserve-ITA T. holding in favour of appellant, held that such capital
reserve formed part of the capital of appellant company under Rule I (iii)-
ITAT also recorded a specific finding that the said reserve was not brought
into existence by creating or increasing the value of any book asset and so not
hit by explanation 1 to rule 2-0n appeal, the High Court reversed the order E
of the !TAT-Allowing the appeal, this court restored the order of the ITAT.

The appellant company was formed for taking over the sterling tea
companies operating in India which were registered in UK. The acquisition
was done in accordance with a Scheme of Arrangement under sections
391and394 of the Companies Act and was granted approval by the High F
Courts. According to the scheme, all the properties, rights, powers and
liabilities of sterling companies were transferred to and vested in the
appellant company. The Reserve Bank of India permitted the appellant
company to pay the aggregate lumpsum consideration at Rs. 490 lakhs
with a direction that there should not be any depletion in the net assets as G
on the actual date of transfer of business from what was given in the
balance sheets of those companies as on 31.12.1976. The value of the net
assets which was to be maintained by the appellant company exceeded the
amount of consideration by Rs. 1,43,89,055 which was shown in the

303 H
304 SUPREME COURT REPORTS [2005] SUPP. 3 S.C.R.

A appellant company's balance sheet as a Capital Reserve as part of "other
reserve". The question was whether the said capital reserve was covered
by Explanation 1 to Rule 2 of the Second Schedule to the Companies
(Profits) Surtax Act 1964 and could not be treated as the capital of the
company for the purposes of Surtax assessment. The Appellate Tribunal
holding in favour of the appellant, gave a finding that the said reserve
B was not brought into existence by creating or increasing the value of any
book asset and was not therefore covered by the said explanation and has
to be treated as part of capital for the purposes of surtax. The High Court,
reversed the order of the tribunal and held that the said reserve was hit
by explanation 1 to rule 2 of the Act. Appellant contended that explanation
C 1 has no application as the assets taken over by the company were all real
and tangible and not book assets and the said reserve was not created by
the appellant company but arose due to statutory requirements in
following the directions of RBI.

Allowing the appeal, the Court
D
HELD: The High Court has completely failed to appreciate the true
meaning and real effect in law of Explanation I to Rule 2 of the Second
Schedule to the Companies (Profits) Surtax Act 1964. The High Court has
grossly erred in stating that the appellant had received benefits in
computation of income tax on account of assets taken over by the appellant
E from other tea companies and that, therefore, the reserve in question could
not be treated as a component of the capital for the purposes of surtax
assessment. Such a new case was neither at all advanced by the Revenue
before the High Court, nor could such a case at all be considered by the
High Court in as much as it did not at all arise out of the order by the
p Appellate Tribunal. The provisions of the Business (Profits) Tax Act, 1947
which were interpreted by this Court in Standard Vacuum Oil Co. are
virtually identical to the provisions of the Companies (Profits) Surtax Act,
1964 and the said judgment directly and squarely covered the instant case.
The High Court has committed a patent error in completely disregarding
that judgment and in reversing the well considered order of the Appellate
G Tribunal which has decided the matter in favour of the appellant and as
a consequence of the impugned order of the High Court, the huge tax
liability was created on the appellant without any warrant or justification
whatsoever. [313-C-G)

Commissioner of Income Tax (Central), Calcutta v. Standard Vacuum
H
GEORGE WILLIAMSON (ASSAM) LTD. v. COMMR. OF INCOME TAX 305
Oil Co., (1966) 59 ITR 685, relied on. A
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 6694-6698
of 2004.

From the Judgment and Order dated 17.7.2003 of the Gauhati High
Court at Assam in LT.A. No. 6 of 2000. B
S. Ganesh, S. Sukumaran, A. Deb Kumar and K. Rajeev for the
Appellant.

Harish Chandra, Anuvrat Sharma, Preetesh Kapur and B.V. Balaram
Das for the Respondent. C
The Judgment of the Court was delivered by

DR. AR. LAKSHMANAN, J. The above appeals were filed against
the judgment and order dated 17 .07 .2003 passed by the Division Bench of
the Gauhati High Court whereby the Division Bench allowed the appeal filed D
by the Commissioner of Income Tax being LT. Appeal No. 6 of 2000 and
reversed the order of the appellate tribunal dated 04.04.2000.
The present case involves an important question of Jaw with regard to
the interpretation of Explanation I to Rule 2 of the Second Schedule to the
Companies (Profits) Surtax Act, 1964. E
The appellant company was formed mainly for the purpose of taking
over the Indian undertakings of several sterling tea companies operating in
India. These sterling tea companies were registered in UK and were operating
in India. The acquisition of the Indian undertakings of the sterling tea F
companies was done in accordance with a Scheme of Arrangement under
Sections 391 and 394 of the Companies Act. The said Scheme of Arrangement
was granted approval by the High Courts of Calcutta and Gauhati. As per the
Scheme of Arrangement, all the properties, rights and powers and all liabilities
of the sterling companies were transferred to and vested in the appellant
Company. The Reserve Bank oflndia was the designated authority for granting G
approval for the price at which the undertakings including the assets were to
be taken over by the appellant.

The Reserve Bank of India, by its letter No. EC.CO.FCS.3517/T-
l 17(Activity)/79 dated June 26, 1979 accorded the aforesaid approval
whereunder it permitted the appellant to pay the aggregate lumpsum H
306 SUPREME COURT REPORTS (2005) SUPP. 3 S.C.R.

A consideration at Rs. 490 lakhs. Para 2 of the said letter reads thus:

"2. We are agreeable to your acquiring the entire business and
undertakings in India of (i) Attaree-khat Tea Company Attaree-khat
Company Ltd., (ii) Bargang Tea Co. Ltd., (iii) Boroi Tea Co. Ltd.,
(iv) Corramore Tea Co. Ltd., (v) Koomsong Tea Co. Ltd., (vi)
B Moabund Tea Co. Ltd., (vii) Rajmai Tea Co. Ltd., (viii) ltakhooli Tea
Co. Ltd., (ix) Tingri Tea Co. Ltd., (x) Bargang Tea Co. Ltd., (xi)
Borelli Tea Co. Ltd. and (xii) Rupajuli Tea Co. Ltd. (hereinafter
referred to as twelve sterling tea companies) with effect from the
close of business as at 31st December, 1977 for a total consideration
C of Rs. 490 lakhs (Rupees Four Hundred Ninety lakhs only). You also
have our permission under section 19(l)(d) of the Foreign Exchange
Regulation Act, 1973 to issue at par 21,61,000 and 2,89,000 equity
shares of Rs. I 0/- each of your company to Williamson Tea Holdings
Ltd., U.K. and Borelli Tea Holdings Ltd., U.K. respectively, in part
settlement of the consideration for the business and not assets in
D India of the said twelve sterling tea companies to be taken over by
you under the scheme of lndianisation."

As per paragraph 3(i) of the said letter, the Reserve Bank of India
specifically directed the appellant that there shall not be any depletion in the
E net assets as on the actual date of transfer of business from what was given
in the balance sheets of the twelve sterling tea companies as on 31.12.1976.
Para 3(i) reads as follows:-"

There shall not be any depletion in the net assets as on the actual date
of transfer of business from what was given in the balance sheets of
F the twelve sterling tea companies as on 31st December, 1976 and an
auditor's certificate to th is effect shall be submitted to us after the
formalities for transfer of business are completed."

As against the consideration of Rs. 4,90,00,000/- permitted by RBI to
be paid by the appellant, the value of the net assets which was to be maintained
G by the appellant as per the aforesaid requirement of RBI was Rs. 6,33,89,055
i.e. higher by Rs. 1,43,89,055/- which was disclosed in the appellant company's
balance sheet as a Capital Reserve as part of "other reserve".

In the assessment of the appellant company under the provisions of the
Companies (Profits) Surtax Act, 1964, the question arose as to whether the
H said capital reserve was to be included while computing the capital of the
GEORGE WILLIAMSON (ASSAM) LTD. v. COMMR. OF INCOME TAX [LAKSHMANAN,J.] 307

appellant company. For the relevant years under appeal, Surtax was leviable A
under the said Act on chargeable profits of a year that exceeded the 'statutory
deduction'. Statutory deduction was defined to mean an amount equal to
15% of the capital of the company as computed in accordance with the
provisions of the Second Schedule or an amount of Rs. 2,00,000 whichever
is greater. Under the Second Schedule to the Act which provides for the rules B
for computing the capital of a company for the purposes of Surtax, the capital
of a company is the aggregate of the following as on the first day of the
previous year relevant to the assessment year-

I. Paid up Share Capital

2. Reserves created in accordance with the provisions of the Indian C
Income Tax Act, 1922 and Income Tax Act, 1961.

3. Other Reserves (as reduced by amounts credited to such reserves
as have been allowed as a deduction in computing the income of
the company for the purposes of the Income Tax Act, 1922 or
the Income Tax Act, 1961. D
Explanation I to Rule 2 of the Second Schedule to the said Act reads
as under: "Explanation 1-A paid up share capital or reserve brought
into existence by creating or increasing (by revaluation or otherwise)
any book asset is not capital of a company for the purposes of this
Act." E
The Revenue treated the impugned reserve as being covered under
the said Explanation I. This contention is rejected by the Appellate
Tribunal. However, the stand of the Revenue has been upheld by the
High Court.
F
It was submitted by Mr. S.Ganesh, learned senior counsel for the
appellant that the said Explanation 1 to Rule 2 operates only where the
reserve in question was brought into existence by creating or increasing (by
revaluation or otherwise) the value of any book asset. It was further contended
that in the present case, the said Explanation 1 has no application at all since
the assets taken over by the appellant company were all real and tangible G
assets and not book assets. Further, it is to be noted that the said reserve was
. not created by the appellant company but arose due to statutory requirements
in following the directions of the RBI.

The Income Tax Appellate Tribunal has, in its order, holding in favour
H

I
308 SUPREME COURT REPORTS (2005] SUPP. 3 S.C.R.

A of the appellant, given the specific finding that the said reserve was not
brought into existence by creating or increasing the value of any book asset.
However, the High Court in its judgment and order completely overlooked
this specific and categorical finding of the Tribunal and has come to the
conclusion that the said reserve is hit by the provision of Explanation I to
Rule 2.
B
Mr. S. Ganesh, learned senior counsel for the appellant invited our
attention to the judgment of this Court in Commissioner of Income Tax
(Central), Calcutta v. Standard Vacuum Oil Co., reported in (1966) 59 !TR
685 which, according to him, directly and squarely covered in favour of the
C appellant and that the said judgment was followed by the Tribunal in deciding
the case in favour of the appellant. However, even though strongly relied
upon by the appellant before the High Court, the High Court has not dealt
with the said judgment of this Court in its impugned judgment whereby the
High Court has reversed the order of the Tribunal and allowed the appeal of
the Revenue. He also drew our attention to the findings of the Commissioner
D of Income Tax and also of the Income Tax Appellate Tribunal.

Mr. Harish Chandra, learned senior counsel for the respondent submitted
that the RBI permitted the assessee company to pay a lump-sum consideration
of Rs. 4,90,00,000 as against the book value of the assets at Rs. 6,33,89,055
and that the difference of Rs.1,43,89,055 between the approved consideration
E to be paid and the book value of the assets were shown by the company in
its balance sheet as capital reserve as part of other reserve. He would further
submit that the High Court has elaborately interpreted the Explanation I of
Rule 2 of Second Schedule of Surtax Act, 1964 and has held that the assessee
company, in the instant case, acted on the net value of its assets as appearing
p in the books of sterling tea companies resulting in difference between the
book value and the consideration paid and by this exercise on the part of the
assessee, the reserve equivalent to the short fall was brought into existence
by the assessee. Arguing further, the learned senior counsel submitted that
the assets were valued by the RBI at a lower price considering the real status
of the assets which was the price fixed by the RBI and that the difference in
G the actual value of the assets as determined by the RBI and book value is
nothing but a reserve came into existence due to the valuation process which
can be termed as revaluation of assets. According to the learned senior counsel,
the judgment of Standard Vacuum Oil Co. (supra) is not identical with the

H
assessee's case as observed by the Assessing Officer. Concluding his argument,
he submitted that the High Court has correctly observed that the difference
-
GEORGE WILLIAMSON (ASSAM) LTD. 1•. COMMR. OF !NCOMETAX [LAKSHMANAN, !.] 309

between the book value of assets and consideration paid shown as other A
reserve could not be treated as capital for the purposes of Surtax assessment
and, therefore, there is nothing on law or on facts which warrants the
intervention of the judgment of this Court.

In the above background of facts, the present appeals give- rise to the
following questions of law of public importance and of recurring nature B
which requires to be decided by us:-

A. Has not the High Court misunderstood and has interpreted
Explanation 1 to Rule 2 of the Second Schedule to the Companies
(Profits) Surtax Act, 1964?

B. Can Explanation 1 to Rule 2 of the Second Schedule to the said
c
Act possibly be considered to be attracted to the present case?

C. Is not the present case directly and squarely covered by the
judgment of this Court in Commissioner of Income Tax (Central),
Calcutta v. Standard Vacuum Oil Co., reported in (1966) 59 ITR D
685

We have perus~d the said case of Standard Vacuum Oil Co. (supra). In
that case, the assessee was a company incorporated with the object of taking
over the assets of certain other companies-Secony Vacuum Oil Co. and
Standard Oil Co. On the date of acquisition of the assets of these two E
companies, the book value thereof as recorded in their books of accounts was

Secony Vacuum Oil Co. $ 97,715,701/-

. Standard Oil Co. $ 46,767,397/-
F
In consideration of transfer of these, the assessee company allotted to
each company 49,995 shares and to Secony Vacuum serial bonds of the value
of$ 13,093,300/-. The remaining 10 shares were divided equally between the
two transferor companies for cash at par. The assessee company entered in
its books of account the book value of the assets so transferred over the par
value of the stock issued and the serial bonds were entered in the books G
under an account styled "Capital Paid in Surplus". After some adjustments,
the "Capital paid in Surplus" account was reduced to $ 117,561,317/- and
thereafter stood unchanged at that figure. The question which arose for
consideration by this Court was whether the said sum appearing in the balance
sheet of the company under the head "Capital paid in Surplus" constituting H
310 SUPREME COURT REPORTS [2005] SUPP. 3 S.C.R.

A the excess of the book value of the assets over the face value of the shares
etc. could be included in the capital base of the company. It is also to be
noted that the above case was under the provisions of the Business Profits
Tax Act, 1947 which had provisions similar to the Companies (Profits) Surtax
Act, 1964. This Court was deciding the issue vis-a-vis the Explanation to
B Clause 2 of Schedule II of the said Act of 1947 (at page 689) which read as
under:

"Explanation.- A reserve or paid-up share capital brought into existence
by creating or increasing (by re-valuation or otherwise) any book
asset is not ·capital for the purposes of ascertaining the abatement
C under this Act in respect of any chargeable accounting period."

It is to be noted that the provisions of the aforesaid Explanation and
Explanation I of the Second Schedule to the Act of 1964 are in pari materia ·
and the relevant portions are identical.

This Court, in the above case, held at page 694 as follows:-
D
"The Explanation to rule 2 has no relevance in the present case. The
difference between the assets received by the company and the par
value of the shares issued cannot be called a book asset "brought into
existence by creating or increasing (by re-valuation or otherwise)".
E The assets received by the assessee-company are real and tangible
assets ...."

In this context, it is beneficial to refer to the specific finding of the
Commissioner of Income Tax (Appeals) which reads as under:-

"Explanation I of Rule 2 of the Second Schedule of the Conipanies
F (Profits) Surtax Act, 1964 relied upon by the A/O reads as under:-

"Explanation 1.-A paid-up share capital or reserve brought into
existence by creating or increasing (by revaluation or otherwise) any
book asset is not capital for computing the capital of a company for
the purposes of this Act."
G
The A/O has noticed the words "brought into existence" without
noticing the further words "by creating or increasing (by valuation or
otherwise) any book asset". The appellant company in this case did
not create or increase any book asset at all as evident from the account.
As has already been stated the appellant took over all the existing
H
GEORGE WILLIAMSON (ASSAM) LTD. v. COMMR. OF INCOMETAX [LAKSHMANAN, J.) 311

assets and liabilities of the erstwhile sterling tea companies at their A
book values and incorporated them in its books of account which
necessitated the creation of capital reserve as the consideration received
fell short of the net worth of the businesses taken over by a
consideration of Rs. 1,43,89,055. In my view the A/O erred in holding
that the capital reserve of Rs. l ,43;89,055 was not includible in the B
appellant's capital for surtax purposes by virtue of Explanation I of
Rule 2 of the second schedule of the Companies (Profits) Surtax Act,
I 964. With the aforesaid observation, I accordingly direct the A/O to
include the said sum in the appellant's Capital for the purpose of its
surtax assessments for the years 1980-81, 1981-82 and 1982-83
respectively. C
Likewise, the Income Tax Appellate Tribunal while placing reliance on
the judgment of Standard Vacuum Oil Co., (supra) in paras 8-12 has observed
as under:

8...... To support his argument, he relied on the ratio of the Hon'ble D
Supreme Court in the case of Commissioner of Income Tax (Control)
Calcutta v. Standard Vacuum Oil Co., (59 !TR 685) where the Hon'ble
Supreme Court discussed the Indian Income Tax Act, 1922 and also
the similar Explanation (supra). The Hon'ble Supreme Court observed
that the Explanation to Rule 2 has no relevance as the difference
between the assets of Company and the par value of the shares issued E
cannot be called a book asset brought into existence by creating or
increasing. The assets received by the assessee-company are real and
tangible assets. Needless to mention that the said issue has already
been discussed by the Commissioner of Surtax (Appeals) in his order.

9. We have heard both the parties at length and gone through the F
materials available on record including the order of both the High
Courts and the amalgamation scheme. From the record it appears that
the Reserve Bank of India has allowed the consideration perhaps on
ad-hoc basis as no basis has appeared from the letter of the Reserve
Bank of India dated 28th June, 1979, (at pages 29-32 of the paper G
book). The Reserve Bank of India in its approval mentioned at para
3 (i) that:-

"There shall not be any depletion in the net assets as on the actual
date of transfer of business from what was given in the Balance
sheets of the twelve sterling tea companies as on 31st December, H
312 SUPREME COURT REPORTS [2005] SUPP. 3 S.C.R.

A 1976 and an auditor's certificate of this effect shall be submitted to
us after the formalities for transfer Qf business are completed."

On query from the Bench, we were told that the actual taken over
was on 31.12.77 i.e. after one year of the amalgamation scheme.

10. From the records the issue is whether the reserve of Rs. 1,43,89,055
B
is a reserve brought into existence by creating or increasing any book
asset of not. At the cost of repetition it may be mentioned that the
assets which were taken over were real and tangible assets and there
was no tangible assets like goodwill etc. which can form a book asset
or artificial assets because the Reserve Bank of India has not given
c any reason for allowing the lump-sum consideration, therefore, this
confusion has arisen. Needless to mention that the value of the assets
and consideration paid have bound to be differentiated. In other words,
the real value of the book value has always a difference.

11. In the instant case, the said amount had to be shown in the
D accounts as other capital reserve in accordance with normal accounting
principles because the consideration received on transfer of the
erstwhile sterling 12 tea companies in India taken over by the assessee
company as a going concern fell short of the net worth of business
taken over and without such entry the balance sheet of the assessee
company on the date of taken over of the business would not have
E
tallied and the difference has created this legal dispute.

12. Therefore, such capital reserve has to be treated as forming a part
of the capital under rule 1 (iii) of the second schedule (supra) Surtax
Act, 1964. Nonetheless, it may be mentioned that the words, "brought
F into existence" were read in isolation without reading the subsequent
words "by creating or increasing, (by valuation or otherwise) any
book assets". By considering the totality of the facts and circumstances
of the case, we are of the view that the assessee had neither created
nor increased any book asset in the instant case. At the time of taking
over no exercise was taken place to tally the assets and the Reserve
G Bank of India has allowed the lump-sum consideration. We are also
of the view that the assets received by the company are real and
tangible assets as evidenced by the extracts of the balance sheet (pages
43-44) of the paper book). In the absence of any additional materials/
evidence, we are of the view that the capital reserve of Rs. 1,43,055
H representing the difference between the value of assets taken over
GEORGE WILLIAMSON (ASSAM) LTD. v. COM MR. OF IN COMETAX [LAKSHMANAN, J.] 313

and consideration allowed by the Reserve Bank of India was rightly A
included by the assessee company for computing the capital to
determine the statutory deduction under the Companies (Profits) Surtax
Act, 1964. Therefore, we find no infirmity with the direction given
to the A.O. by the Commissioner of Surtax (f.ppeals) to include the
said sum in the assessee' s capital for the purpose of its surtax
assessment for the assessment years under consideration." B

As rightly pointed out by learned senior counsel for the appellant the
judgment of Standard Vacuum Oil Co., (supra). was cited before the High
Court, the Division Bench failed to appreciate the applicability of the said
judgment to the case on hand. Likewise, the High Court has completely
failed to appreciate the true meaning and real effect in law of Explanation 1 C
to Rule 2 of the Second Schedule to the Companies (Profits) Surtax Act,
1964. The Division Bench, in our view, has grossly erred in stating that the
appellant had obviously received benefits in computation of inco:ne tax on
account of assets taken over by the appellant from other tea companies and
that, therefore, the reserve in question could not be treated as a component D
of the capital for the purposes of surtax assessment. Such a new case was
neither at all advanced by the Revenue before the High Court, nor could such
a case at all be considered by the High Court inasmuch as it did not at all
arise out of the order by the Appellate Tribunal. The provisions of the Business
(Profits) Tax Act, 1947 which were interpreted by this Court in Standard
Vacuum Oil Co. (supra). are virtually identical to the provisions of the E
Companies (Profits) Surtax Act, 1964 and since the said judgment directly
and squarely covered the instant case. In our opinion, the High Court has
committed a patent error in completely disregarding the judgment of this
Court in Standard Vacuum Oil Co. (supra). and in reversing the well-considered
order of the Appellate Tribunal which has decided the matter in favour of the F
appellant and as a consequence of the impugned order of the High Court, the
huge tax liability was created on the appellant without any warrant or
justification whatsoever.

We, therefore, have no hesitation to set aside the order passed by the
High Court impugned in these appeals and restore the order passed by the G
Tribunal. In the result, these appeals are allowed. No costs.

K.G. Appeal allowed.