JUDGMENT Heard. The following question has been referred by the Tribunal, Delhi Bench, for opinion of this court under section 256(1) of the Income Tax Act, 1961, read with section 9 of the Companies (Profits) Surtax Act, 1964 (hereinafter referred to as the Act) :
"Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that the gratuity reserve of Rs. 2 lakhs and reserve for bad and doubtful debts of Rs. 7,19,863 are includible in the capital base for determining the statutory deduction under section 2(6) of the Companies (Profits) Surtax Act, 1964 ?"
2. We find that gratuity reserve and reserve for bad and doubtful debts have not been worked out on actuarial basis. It is to be noted that so far as the gratuity reserve is concerned, it is to be worked out on actuarial basis. For the purpose of bad and doubtful debts actual quantification would be necessary. That question does not appear to have been considered by the Tribunal. That being the position, we remit the question back for fresh hearing in view of what has been stated by the Apex Court in CIT v. Jyoti Ltd. (1996) 219 ITR 388.
2. We find that gratuity reserve and reserve for bad and doubtful debts have not been worked out on actuarial basis. It is to be noted that so far as the gratuity reserve is concerned, it is to be worked out on actuarial basis. For the purpose of bad and doubtful debts actual quantification would be necessary. That question does not appear to have been considered by the Tribunal. That being the position, we remit the question back for fresh hearing in view of what has been stated by the Apex Court in CIT v. Jyoti Ltd. (1996) 219 ITR 388.