M/S. SUNDARAM CLAYTON LTD. ETC.versusCOMMISSIONER OF INCOME TAX

               M/S. SUNDARAM CLAYTON LTD. ETC.                                    A
                              v.
                 COMMISSIONER OF INCOME TAX

                                MAY 2, 1996
                                                                                  B
                 [G.N. RAY AND B.L. HANSARIA, JJ.]

      Companies' (Profits) Surtax Act 1964-Schedule II, Rule 3---Computa-
tion of capital-Whether bonus issue of shares resulted in prop01tionate in-
crease in share capital-Held, no; issue of bonus shares only resulted in
conversion of resC1ves and did not add to the capital base which was 1101 there
                                                                                  c
on the first day of the previous year.

      Companies (Profits) Surtax Act 1964, Schedule I{, Rules 1 (iv), (vJ and
3---Computation of capital-Held, for assessee to benefit from second part of
Rule 3 capital base must have increased during previous year on accou11t of D
increase of paid-up share capital or issue of debentures or b01rowing of a11y
moneys.

      Interpretation of Statutes--Super Profits Tax Act 1963 -Schedule II,
Rule 2-Held, bei11g differe11~ not genna/le for interpreting Rule 3 of Schedule
II of Compa11ies (Profits) Surtax Act 1964.                                       E

      The reference before the High Court raised a short question about
the computation of capital under Rule 3 of the Schedule ll of the Com-
panies (Profits) Surtax Act, 1964 ('Surtax Act'). In the assessment year
1971-72, corresponding to previous year beginning from August 1, 1969 F
and ending on July 31, 1970, the appellant-Company, SCL, issued 20400
bonus shares of the face value of Rs. 100 each. SCL claimed that Rs.
20,40,000 Which represented the bonus issue as on February 23, 1970
became the basis for increase in the capital determined at Rs. 1,43,39,462
as on the first day of the previous year i.e. August 1, 1969. It was claimed G
that since the bonus shares were in addition to the paid up capital of the
company, and since any 'increase' in the paid up capital was to be properly
reckoned for the purpose of computation. of capital under Rule 3 of
Schedule II of the surtax Act, the proportionate amount, worked out to Rs.
6,84,237, must be added to the capital as on August 1, 1969 for the purpose
of capital computation.                                                      H
                                      253
    254                  SUPREME COURT REPORTS [1996] SUPP. 2S.C.R.

A          Although the Income Tax officer rejected SCL's contention, the
    Income Tax Appellate Tribunal accepted its claim. A reference under
    s.256(1) of the Income Tax Act, 1961 was then made by the department
    before the Madras High Court for answering the question whether for the
    computation of capital under the Surtax Act the share capital of SCL
    should be proportionately increased on account of the issue of bonus
B   shares.

        The Madras High Court, while answering the reference against the
  assessee SCL, relied on the decision of the Bombay High Court in Com-
  missioner of Income Tax v. Centwy Spinning and Manufactwing Company
C Ltd., 101 !TR 6 and noted the decision of the Delhi High Court in Com-
  missioner of Swtax v. Food Specialities Ltd., 129 !TR 731. The High Court
  did not agree with the decision of the Himachal Pradesh High Court in
  Commissioner of lncome Tax v. Mohan Meakin Breweries Ltd., 93 !TR 586
  on the ground that the said decision proceeded on the application of Rule
  2 of Schedule II of the Super Profits Tax Act, 1963 which was not pari
D materia with Rule 3 of Schedule II of the Surtax Act
          Before this court the assessee reiterated its reliance npon the
    decision in Mohan Meakins Breweries and contended that Rule 2 of the
    Super Profits Act, 1963 being similar to Rule 3 of the Surtax Act, a plain
E   reading of the rules would result in the bonus issue qualifying for propor·
    tionate inclusion in the capital base.

          Dismissing the appeal, this Court

          HELD : 1. By the issuance of bonus shares in the assessment year
    in question there had only been a conversion of the reserves into fully paid
F
    bonus shares, which conversion did not add up to the capital or reserve
    base which was not there on the first day of the previous year. [263-D]

        Commissioner of Income Tax v. Century Spinning and Manufacturing
  Company Ltd., (Born) and Commissioner of Surtax v. Food Specialities Ltd.,
G (Del), approved.
          Cape Brandy Syndicate v. Commissioners of Inland Revenue, (1921) 1
     KB 64, referred to.

          2. In order that Rule 3 could apply, the capital base of the company,
H as computed in accordance with Rule 1 of Schedule II of the Surtax Act
          SUNDARAM CLAYTON LTD. v. C.I.T. [G.N. RAY.J.]                255

must have increased during the previous year and such increase should A
be on account of increase of paid-up share capital or issue of debentures
referred to in clause (iv) or borrowing of any moneys referred to in clause
(v) <Jf Rule 1. Unless these conditions are satisfied, there would be no
occasion for the assessee company to get the benefit contemplated by the
second part of Rule 3 of Schedule II of the Surtax Act. [263-E-F]           B
      Commissioner of Swtax v. New India Industlies Ltd., 202 ITR 619
(Guj.), approved.

      3. The incidence of Rule 2 of the Super Profits Tax Act, 1963 being
different, the interpretation of the said rule by the Himachal Pradesh High   C
Court is not germane for interpreting Rule 3 of Schedule II of the Surtax
Act. [263-H)

      Commissioner of Income tax v. Mohan Meakin Brewe1ies Ltd., 93 ITR
586, overruled.
                                                                              D
     CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 4360-61
(NT) of 1981 Etc.

     From the Judgment and Order dated 21.10.81 of the Madras High
Court in T.C. Nos. 743-44/77 Reference Nos. 495-96 of 1977.
                                                                              E
      Ms. Janki Ramachandran Adv. for the Appellants.

     G.C. Sharma and Dr. R.R. Mishra, B.S. Ahuja and S.N. Terdol for
the Respondent.

      The Judgment of the Court was delivered by                              F
      G.N. RAY, J. Civil Appeal Nos. 1360-61 of 1981 are directed against
judgment dated October 21, 1981 passed by the Division Bench of Madras
High Court in Tax Case Nos. 743-744 of 1977 arising out of Reference Nos.
495-496of1977. Civil Appeal No. 1705 of 1980 is directed against judgment G
dated November 12, 1986 passed by the Division Bench of Madras High
Court in Tax Case Petition No. 367 of 1986. It may be stated here that the
tax Case Petition No. 367 of 1986 was disposed of by the High Court
following its judgment passed by the Madras High Court in the said Tax
Case Nos. 743-744 of1977. It will, therefore, be appropriate to refer to the
relevant facts relating to Tax Case Nos. 743-744 of 1977 which were H
    256                   SUPREMECOURTREPORTS [1996] SUPP. 2S.C.R.

A   disposed of by the Madras High Court on October 21, 1981.

          Tax Case Nos. 743-744 of 1977 arose out of the reference made under
    Section 256 (1) of the Income Tax Act, 1961. The reference before the
    High Court raised a short question about the computation of capital under
    Rule 3 of the Schedule II of the Companies (Profits) Surtax Act, 1964. The
B   origin of the Companies (Profits) Surtax Act. 1964 may be traced back to
    the Surtax Act, 1940, which was enacted for the purpose of moping up
    unreasonable and extra profits earned in the business during the second
    world war. Later on, Super Profits Tax Act, 1963 and the Companies
    (Profits) Surtax Act, 1964, were enacted for similar purpose. The rationale
c   behind these Acts is that any profit over and above the reasonable profit
    expected in the commercial and productive activities would be taxed at a
    special rate.

          It will be appropriate to note the relevant facts for the purpose of
D appreciating the rival contention made before the Madras High Court and
    also at the hearing of these appeals. In the assessment year 1971-72,
    corresponding to previous year beginning from August 1. 1996 and ending
    on July 31, 1970, the appellant-Company, M/s. Sundaram Clayton Ltd.,
    issued 20400 bonus shares of the face value of Rs. 100 each. This bonus
    issue was brought about by capitalising part of the Company's general
E   reserves. Accordingly, a snm of Rs. 20,40,000 was converted into bonus
    shares. The assessee-Company claimed that the said amount of Rs.
    20,40,000 which represented the bonus issue as on February 23, 1970
    became the basis for increase in the capital determined at Rs. 1,43,39,462
    as on the first day of the previous year i.e. August 1, 1969. It was claimed
F   by the Company that the bonus shares were in addition to the paid up
    capital of the Company. Since any "increase" in the paid up capital of the
    Company was to be properly reckoned for the purpose of computation of
    capital under Rule 3 of Schedule II of the Companies (Profits) Surtax Act,
    1964 (hereinafter referred to as Surtax Act, 1964), it was claimed that the
    proportionate amount, worked out to Rs. 8,84,237, must be added to the
G   capital as on August l, 1969 for the purpose of capital computation.

          The Income Tax Officer rejected the said contention of the assessee-
    Company, but the Income Tax Appellate Tribunal accepted the assessee's
    case. A reference was made by the taxing department under Section
H   256(1) of the Income Tax Act, 1961 before the Madras High Court for
               SUNDARAM CLAYTON LTD. v. C.l.T. [G.N. RAY, J.]                  257

     answering, inter alia, the following question :                                  A

             "Whether on the facts and in the circumstances of the case and
             having regard to Rule 3 of Schedule II of the Companies (Profits)
             Surtax Act, 1964 the share capital of the Company should be
             increased proportionately on account of the issue of bonus shares
                                                                                      B
             for the purpose of computation of capital nuder the Companies
             (Profits) Surtax Act, 1964?"

             The Madras High Court held that when bonus shares were issued,
     the paid up capital of the Company increased, but so far as the column of
     liabilities in the balance sheet of the Company was concerned, a sum             C
     equivalent to the value of the bonus shares was carved out from the amount
     of reserves and placed in the column of paid up capital of the Company
     on the side of liabilities in the balance sheet. The High Court held that the
-.   process of conversion of reserves into bonus shares did neither reduce the
     overall capital of the Company nor increase it. The overall capital of the       D
     Company remained the same as in the beginning of the financial year. It
     was held by the High Court that what Rule 3 of Schedule II of the Surtax
     Act. 1964 contemplated was that the capital, as on the first day of the
     previous year, get increased by way of an addition to any part of the capital
     so computed, whether the increase be to the paid up capital or to the
     reserves or to any other items figuring on the liabilities side of the balance   E
     sheet. In other words, there must be a fresh influx of capital in order to
     attract Rule 3 of Schedule II of the Surtax Act, 1964.

            The High Court indicated that the mere act of capitalising a part of
     the reserve and issuing bonus shares did not mean that there was any
     influx of additional capital into the Company over and above what figured F
     as the opening capital in the liabilities side of the balance sheet, consisting
     of the paid up capital and the reserves, among other things. The High
     Court, therefore, held that on a common-sense understanding of the said
     rule and on a proper reading of the various entries in the Company's
     balance sheet, the contention put forward by the assessce must be rejected G
     as untenable. The High Court placed reliance on a decision of the Bombay
     High Court in Commissioner of Income Tax v. Centzuy Spinning and
     Manufactwing Company Ltd., 101 !TR 6. The High Court also noted the
     decision of the Delhi High Court in Commissioner of Surtax v. Food
     Specialities Ltd., 129 !TR 731 which held the similar view. The Delhi High
     Court in the said decision also referred to the decision of the Bombay High H
    258                   SUPREME COURT REPORTS [1996] SUPP. 2 S.C.R.

A   Court in Century Spinning Mill's case (supra).

           On behalt of the assessee, however, reliance was placed on a decision
    of the Himachal Pradesh High Court in Commissioner of Income Tax v.
    Mohan Meakin Brewe1ies Ltd, 95 !TR 586. In the said case, interpretation
    of Rule 2 of Schedule II of Super Profits Act, 1963 came up for considera-
B   tion. It was held in the said decision that an increase in the paid up capital
    by the simple process of capitalising a part of the existing reserves, would
    entitle the assessee to claim for an increase in the computation of the
    capital under Rule 2 of Schedule II of the Super Profits Tax Act. 1963. The
    Madras High Court in the impugned decision did not agree with the view
c   taken by the Himachal Pradesh High Court. The Madras High Court also
    indicated that the decision of the Himachal Pradesh High Court was
    rendered on a construction and application of Rule 2 of Schedule II of a
    different statute, namely the Super Profits Tax Act, 1963. The Madras High
    Court indicated that the language of Rule 2 of Super Profits Tax Act, 1963       •
    and Rule 3 of the Surtax Act, 1964 was not pmi matelia. The High Court
D   also indicated that the Bombay High Court in Cennuy Spinning Mill's case
    (supra) noted that there was a distinction between Rule 2 and Rule 3 of
    the said Acts and such difference had a bearing on the computation of
    capital.

          It may be stated here that two other questions were also referred to
E
    before the High Court in Tax Case Nos. 743-744 of 1977 and the same were
    answered by indicating that these stood answered by the decisions of that
    Court in Southem Roadways v. Commissioner of income Tax, 130 !TR 545
    and in Additional Commissioner of Income Tax v. Bimetal Be01ings Ltd.,
    110 !TR 131. For the purpose of disposal of the appeals these questions
F   answered by the High Court are not required to be considered and hence
    we are not doing so.


          The question as to the computation of the income on account of the
    issue of bonus shares \Vas answered by the High Court in favour of revenue
G   and against the asscssce-Company by holding that the finding made by the
    Income Tax Appellate Tribunal that by issue of bonus shares in the
    assessment year in question had resulted in increase in capital asset of the
    Company within the meaning of Rule 3 of Schedule II of Surtax Act, 1964
    was erroneous and could not be sustained on a correct interpretation of
    the said Rule. In these appeals such decision of the Madras high Court is
H   under challenge.
              SUNDARAMClAYTONLID. v. C.l.T. (G.N.RAY,J.]                  259

           Mrs. J anki Ramachandran, the learned counsel appearing for the A
    appellant-Company, has referred to Rule 2 of Schedule II of the Super
    Profits Tax Act, 1963 and Rule 3 of the Surtax Act, 1964 and contended


-
    that both the rules being essentially similar have same legal incidence and
    the High Court erred in proceeding on the footing that the ;ncidence of
    Rule 2 of Super Profits Tax Act, 1963 and Rule 3 of Schedule II of Surtax B
    Act, 1964 was different by placing reliance on the said decisions of Bombay
    and Delhi High Courts. It will be appropriate at this stage to refer to Rule
    2 of Schedule II of Super Profits Tax Act, 1963 and Rule 3 of the Schedule
    II of the Surtax Act, 1964.

           Rule 2 of Second Schedule of Super Profits Tax Act, 1963.             C

                Where after the first day of the previous year relevant to the
            assessment year, the paid up capital of a company is increased or
            reduced by any amount during the previous year, the capital
            computed in accordance with rule l shall be increased or D
            decreased, as the case may be, by a portion of that amount which
            is proportional to the portion of the previous year during which
            the increase or the reduction of the paid up share capital remained
            effective.

            Rule 3 of the Second Schedule of the Companies (Profits) Swtax       E
            Act, 1964.

               Where after the first day of the previous year relevant to the
            assessment year the capital of a co111pany as computed in accord-
            ance with the foregoing rules of this Schedule is increased by any   F
            amount during the previous year on account of increase of paid
            up share capital or issue of debentures or borrowing of any moneys
            referred to in clause (v) of rule 1 or is reduced by any amount on
            account of reduction of paid up share capital or redemption of any
            debentures or repayment of such moneys, such capital shall be
            increased or reduced, as the case may be, by a sun1 which bears      G
            to that amount the same proportion as the number of days of the
            previous year during which the ii1crease or the reduction remained
            effective bears to the total number of days in that previous year.

                                                         (Emphasis supplied) H
    260                   SUPREME COURT REPORTS [1996] SUPP. 2 S.C.R.

A         The learned counsel for the appellant has contended that in the
    Schedules under Super Profits Tax Act. 1963 and Surtax Act, 1964
    provisions have been made for calculating capital invested and the profits.
    The capital gains, though subject to normal income tax, was not taken into


B
    consideration for arriving at chargeat~e income for the purpose of Super
    Profits Tax Act, 1963 and the Surtax Act, 1964, Mrs. Ramachandran has
    submitted that from the chargeable profits as arrived in accordance with
                                                                                      -
    the provisions of the First Schedule, a specified percentage (six per cent
    in the case of the Super Profits Tax Act and ten per cent in the case of the
    Surtax Act) of the capital as computed in accordance with the provisions
    in the Second Schedule was to be deducted. This is known as the standard
C   deduction or statutory deduction. This deduction is considered to be a fair
    or reasonable return on the capital invested in the business. Any balance
    remaining was to be subjected to surtax. She has contended that any
    method by which (1) the chargeable profits could be reduced and/or (2)
    the capital base could be increased will work out to the advantage of the
D   taxpayer. She has urged that on a plain reading of the rules of the Second
    Schedule, the amount represented by the bonus shares issued by the
    appellant-company will straightaway qualify for proportionate inclusion in
    the capital base. There is nothing said anywhere either in the Schedules or
    in the main body of the Act that the increase in the share capital must be
    accompanied by a corresponding inflow of cash. She has submitted that in
E   a taxing statute, clear words are necessary to tax the subject. In interpreting
    a taxing statute, one is to look simply at what is clearly said. There is no
    room for intendment; there is no equity about a tax. There is no presump-
    tion as to a tax; nothing should be read into the Act; nothing should be
    implied; one should fairly look at what is said and what is clearly said. In
F   support of this contention, Mrs. Ramachandran has referred to a decision
    of the English Court in Cape Brandy Syndicate v. Commissioners of Inland
    Revenue, (1921) 1 King's Bench 64. She has submitted that this Court has
    also followed the view taken in Cape Brandy's case (supra) in the case
    reported in 60 !TR 392 by observing to the following effect :

G                "In a taxing Act one has to look merely at what is clearly staled,
             and in a case of reasonable doubt the construction most beneficial
             to the subject is to be adopted. But even so, the fundamental rule
             of construction is the same for all the statutes, whether fiscal or
             othenvisc. The underlying principle is that the meaning and inten-
H            tion of a statute must be collected from the plain and unambiguous
           SUNDARAMCLAYTON LID. v. C.l.T. [G.N.RAY,J.]                       261

        expression used therein rather than from any notions which may               A
        be entertained by the Court as to what is just or expedient. The
        expressed intention must guide the Court."

      Mrs. Ramachandran has submitted that the Bombay High Court in
Century Spinning Mill's case (supra) did not spell out as tc why Rule 2 of           B
Super Profits Tax Act 1963 and Rule 3 of Surtax Act, 1964 was different.
The Delhi High Court in Food Specialities case (supra) also did not state
how the said rules were different. The learned counsel has submitted that
it was only by a process of reasoning that the decision was arrived at by
the Delhi High Court by attributing motives to the legislature which are
not borne out by the plain words of the statute. Hence, the Madras High              C
Court should not have placed reliance on the decisions of the Bombay and
Delhi High Courts. The interpretation of Rule 3 of Schedule II of the
Surtax Act, 1964 as made by the Madras High Court is erroneous and
against plain reading of the provisions of Rule 3. She has, therefore,
submitted that the appeal should be allowed by accepting the view taken              D
by the Income Tax Appellate Tribunal in favour of the assessee.


       Mr. G.C. Sharma the learned Senior Advocate appearing for the
respondent, disputed the contentions of Mrs. Ramachandran. He has
submitted that Rule 2 of Schedule II of Super Profits Tax Act, 1963 and
Rule 3 of Surtax Act, 1964 are not similarly worded. In this connection, he          E
has referred to the decision of the Gujarat High Court in Commissioner of
Swtax v. New India Industlies Ltd. 202 ITR 619 which has explained the
legal incidence of both the said Rules clearly by indicating cogent reasons.
It has been held by the Gujarat High Court in that case that the expression
"reserves" has not been defined in the Super Profits Tax Act, 1963 or the            F
Companies (Profits) Surtax Act, 1964. The dictionaries do not make any
distinction between the two concepts 11 reserve11 and 11 provision 11 while giving
their primary meanings, whereas in the context of those Acts, a clear
distinction between the two is implied. Though the expression "reserve" is
not defined, since it occurs in a taxing statute applicable to companies only
•nd to no other assessable entities, the expression has to be understood in G
its popular sense, namely, the sense or meaning that is attributed to it by
men of business, trade and commerce and by persons interested in or
dealing with companies. Therefore, the meaning attached to the words
"reserve 11 and nprovisionn in the Con1panies Act, 1956, dealing with the
preparation of the balance sheet and the profit and loss account would H
    262                      SUPREME COURT REPORTS [1996] SUPP. 2 S.C.R.

A   govern their construction for the purposes of the two enactments. The
    hroad distinction between the two is that whereas a 11 provision 11 is a charge
    against the profits to be taken into account against gross receipts in the
    profit and loss account, a 11 reserve 11 is an appropriation of profits, the a.sset
    or assets by which it is represented being retained to form part of the
    capital employed in the business. If any retention or appropriation of a sum
B            1          1
    is not a 'provision i.e. it is not designed lo meet depreciation, renewals
                         \


    or diminution in the value of assets or any known liability, the same is not
                   1         1
    necessarily a 'reserve The question \Vhether the conct:rned amounts con-
                              '.


    stitute "reserve" or not will have to be decided by having regard to the true
    nature and character of the sums to be appropriated depending on the
c   surrounding circumstances, particularly the intention with which, and the
    purpose for which, such appropriations had been made. The true nature
    and character of the appropriation must be determined with reference lo
    the substance of the matter.


D          Mr. Sharma has further submitted that a mere look at Rule 2 of
    Schedule II of the Super Profits Tax Act, 1963 as contrasted with Rule 3
    of Schedule II of the Surtax Act, 1964 will show that Rule 2 of Super Profits
    Tax Act, 1963 visualised mere increased in the paid up share capital,
    without reference to any increase in the capital base, enough for computa-
    tion of capital; but before Rule 3 of Schedule II of Surtax Act, 1964 may
E   apply, an increase in the capital base as computed under rule 1 has to be
    shown to have taken place. Counsel has submitted that the Gujarat High
    Court in New India Industries' case (supra) has very correctly indicated that
    Rule 3 will apply if (1) capital of the company as computed in accordance
    with rule 1 of Schedule II of the Surtax Act, 1964 has increased by any
F   amount during that previous year; and (2) such increase should be on
    account of increase of paid up share capital or issue of debentures referred
    to in clause (iv) or borrowing of any moneys referred to in dame (v) of
    rule I. If these conditions are satisfied, then and then only, there will be
    an occasion for the company to get the benefit as contemplated by the
    second part of rule 3 to the effect that such capital, computed as per rule
G   1, will be permitted tu be increased by a sum which bears to the amount
    of such increase of paid up share capital, or issue of debentun..: or borrow-
    ings, the same proportion as the number of days of the pre,ious year during
    \Vhich the increase in the paid up share capital, or issue of debentures or
    borrowings of any money, as the case may be, bears to the total nu1nber Of
H   days in that previous year. It has been also submitted that under Rule 3 of
           SUNDARAM CLAYTON LTD. "· C.LT. f G.N. RAY, J.]               263

Schedule TI of Surtax Act, 1964 before benetit under the rule can be A
pressed into service by the asse.ssee-cornpany, it n1ust be shovm that the
capital base for the said company, as on the first day of the previous year
relevant to the assessment year as per rule l, has in fact undergone a hike.
If the said basic condition is not satisfied, Rule 3 is not attracted at all.
Such interpretation of Rule 3 being clearly discernible, no other interpreta-
                                                                              B
tion should be accepted and the Madras, Bombay and Gujarat High Courts
had no difficulty in taking same view in interpreting Rule 3 of Schedule 11
of Surtax Act, 1964. He has submitted that in the aforesaid facts no
interference by this Court is called for and the appeals should be dismissed
with cost.
                                                                               c
       After giving our careful consideration of the facts and circumstances
of the case and the contentions made by the respective counsel for the
parties, it appears to us that by issuing the bonus shares in the assessment
year in question there had only been a conversion of the reserves into fully
paid bonus shares, which conversion did not add up to the capital or           D
reserve base which was not there on the first day of the previous year. The
Gujarat High Court in New India 111dusoies case (supra) has very suceinctly
explained the difference in incidence of Rule 2 of Schedule TI of Super
Profits Tax Act, 1903 and Ruic 3 of Surtax Act, 1964. We feel no hesitation
in approving the view taken therein that before Rule 3 of Surtax Act, 1964
can be made applicable, an increase in the capitalbase as computed under       E
rule .1 has to be shown to have taken place. In order that Rule 3 could
apply the capital base of the company, as computed in accordance with
rule 1 of Schedule II of Surtax Act, 1964, must have increased during the
previous year and such increase should be on account of increase of paid
up share capital or issue of debentures referred to in clause (iv) or          F
borrowing of any moneys referred to in clause (v) of rule 1. Unless these
conditions are satisfied, there would be no occasion for the assessee-con1-
pany to get benefit contemplated by the second part of rule 3 of Schedule
II of Surtax Act, 1964.

     The Bombay, Madras and Delhi High Court have also taken the               G
same view without, however, elaborating the implication of Rule 3 of
Schedule II of Surtax Act, 1964 as has been done by the Gujarat High
Court. The incidence of Rule 2 of Schedule II of Super Profits Tax Act,
1963 being different, the interpretation of the said rule by the Himachal
Pradesh High Court is not germane for interpreting rule 3 of Schedule II       H
    264                   SUPREME COURT REPORTS [1996J SUPP. 2 S.C.R.

A   of Surtax Act, 1964. "(ne afort;;said interpretation is quile reasonable and
    is clearly discernible in l<ule 3. The decisions cited by Mrs. Ramachandran
    relating co the priuciple of inLerpretation of taking statute do not caIJ for
    any change in the view we have taken on the language of the Rule.

           We, th~rcfore, find no reason to interfere with the impugned
B   decisions of the Madras High Court and all the appeals are dismissed,
    \Vithout any order as to costs.

    S.M.                                                     Appeals dismissed.