Vazir Sultan Tobacco Co. Ltd. v. CIT

132 ITR 559Supreme Court of India1981#3031 most cited

What is Vazir Sultan Tobacco Co. Ltd. v. CIT authority for?

A reserve set apart to meet a known liability is not a reserve for the purposes of accounting, but rather a provision for a liability. This means it cannot be considered a reserve for tax purposes.

39

judgments rely on this decision, according to BharatTax’s citation analysis of 366,470 Indian tax judgments — from 1996 to 2025.

Also referred to as

Vazir Sultan Tobacco Co. Ltd. v. CIT · 132 ITR 559 · SC · 1981 · debenture redemption reserve · liability vs reserve · Companies Act 1956 · Schedule VI · provision for liability · commercial accountancy

Also reported as

7 Taxmann 28

Sections most often in play

Section 115JBSection 115JB(2)(i) (Explanation 1Section 115QASection 143(3)Section 2(22)(d)Section 2(47)Section 251(2)Section 80-IA

Issues it is cited on

section 33acsection 80hhesection 32asection 117section 74section 210section 4asection 73section 72section 115jasection 288section 80h

Judgments citing Vazir Sultan Tobacco Co. Ltd. v. CIT

M/S. Genus Electrotech Ltd., Ahmedabad vs. The ACIT, Circle-4, Ahmedabad

In the result, the appeals of the Revenue and assessee are decided as under:

ITA 1763/AHD/2014[2009-10]Status: DisposedITAT Delhi17 Feb 2021AY 2009-10

Bench: Shri O.P. Kant & Shri K.N. Chary[Through Video Conferencing]

…iability, a Debenture Redemption Reserve cannot be regarded as a reserve for the purpose of Schedule VI to the Companies Act, 1956. In National Rayon Corporation, the Supreme Court followed its earlier decision in Vazir Sultan Tobacco Co. Ltd. Vs. CIT [[1981] 132 ITR 559], in holding that since the concept of reserve and of a provision is well known in commercial accountancy and is used in the Companies Act, 1956, while dealing with the preparation of balance sheets and profit and loss accounts the meaning of that concept would have to be gathered from the meaning attached in the Companies Act itself. The followi…

The DCIT, Circle-4, Ahmedabad vs. M/S. Genus Electrotech Ltd., Ahmedabad

In the result, the appeals of the Revenue and assessee are decided as under:

ITA 100/AHD/2014[2008-09]Status: DisposedITAT Delhi17 Feb 2021AY 2008-09

Bench: Shri O.P. Kant & Shri K.N. Chary[Through Video Conferencing]

…iability, a Debenture Redemption Reserve cannot be regarded as a reserve for the purpose of Schedule VI to the Companies Act, 1956. In National Rayon Corporation, the Supreme Court followed its earlier decision in Vazir Sultan Tobacco Co. Ltd. Vs. CIT [[1981] 132 ITR 559], in holding that since the concept of reserve and of a provision is well known in commercial accountancy and is used in the Companies Act, 1956, while dealing with the preparation of balance sheets and profit and loss accounts the meaning of that concept would have to be gathered from the meaning attached in the Companies Act itself. The followi…

M/S. Genus Electrotech Ltd., Ahmedabad vs. The Dy.CIT, Circle-4, Ahmedabad

In the result, the appeals of the Revenue and assessee are decided as under:

ITA 2831/AHD/2013[2008-09]Status: DisposedITAT Delhi17 Feb 2021AY 2008-09

Bench: Shri O.P. Kant & Shri K.N. Chary[Through Video Conferencing]

…iability, a Debenture Redemption Reserve cannot be regarded as a reserve for the purpose of Schedule VI to the Companies Act, 1956. In National Rayon Corporation, the Supreme Court followed its earlier decision in Vazir Sultan Tobacco Co. Ltd. Vs. CIT [[1981] 132 ITR 559], in holding that since the concept of reserve and of a provision is well known in commercial accountancy and is used in the Companies Act, 1956, while dealing with the preparation of balance sheets and profit and loss accounts the meaning of that concept would have to be gathered from the meaning attached in the Companies Act itself. The followi…

M/S. Genus Electrotech Ltd., Ahmedabad vs. The Dy.CIT, Circle-4, Ahmedabad

In the result, the appeals of the Revenue and assessee are decided as under:

ITA 2830/AHD/2013[2007-08]Status: DisposedITAT Delhi17 Feb 2021AY 2007-08

Bench: Shri O.P. Kant & Shri K.N. Chary[Through Video Conferencing]

…iability, a Debenture Redemption Reserve cannot be regarded as a reserve for the purpose of Schedule VI to the Companies Act, 1956. In National Rayon Corporation, the Supreme Court followed its earlier decision in Vazir Sultan Tobacco Co. Ltd. Vs. CIT [[1981] 132 ITR 559], in holding that since the concept of reserve and of a provision is well known in commercial accountancy and is used in the Companies Act, 1956, while dealing with the preparation of balance sheets and profit and loss accounts the meaning of that concept would have to be gathered from the meaning attached in the Companies Act itself. The followi…

V.R. Construction P.Ltd, Mumbai vs. Asst CIT 11(3)(2), Mumbai

In the result, the appeal filed by the Revenue is dismissed

ITA 5048/MUM/2017[2012-13]Status: DisposedITAT Mumbai30 Aug 2019AY 2012-13

Bench: Shri Saktijit Dey () & Shri N.K. Pradhan () Assessment Year: 2012-13

For Appellant: Mr. Naresh Jain, ARFor Respondent: Mr. Sushil Kumar Poddar, DR
Section 115Section 115JSection 143(3)Section 33ASection 80I

…ity, a Debenture Redemption Reserve cannot be regarded as a reserve for the purpose of Schedule VI to the Companies Act, 1956. In National Rayon Corpn. Ltd. (supra) the Supreme Court followed its earlier decision in Vazir Sultan Tobacco Co. Ltd. v. CIT [1981] 132 ITR 559 /7 Taxman 28, in holding that since the concept of reserve and of a provision is well known in commercial accountancy and is used in the Companies Act, 1956, while dealing with the preparation of balance sheets and profit and loss accounts the meaning of that concept would have to be gathered from the meaning attached in the Companies Act itself.…

The ITO, Corporate WD-2(4), Kochi vs. M/S.Team Front Line Ltd, Kochi

In the result, this appeal filed by the revenue is treated to be allowed

ITA 502/COCH/2018[2015-16]Status: DisposedITAT Cochin22 Mar 2019AY 2015-16

Bench: S/Shri Chandra Poojari, Am & George George K., Jm

…gh Court has also observed that once the assessee transferred any amount to the general reserve, it treated the same as the profit. In this connection, reference was made to the decision of Hon’ble apex court in the case of Wazir Sultan Tobacco Ltd. (1981) 132 ITR 559, where it has been held that a reserve is appropriation of profits. 7.5 In the light of the discussion made above, and following the decision of Bombay High Court in the case of Solid Containers Ltd. vs. DCIT (supra) where the principle enunciated by the Supreme Court in the case of CIT vs T.V. Sundaram Iyengar & Sons Ltd. (supra) has been appl…

Wellknown Polyester Ltd, Mumbai vs. DCIT Cen Cir 7(4), Mumbai

ITA 5850/MUM/2016[2014-15]Status: DisposedITAT Mumbai13 Jun 2018AY 2014-15

Bench: Shri G.S. Pannu & Shri Ram Lal Negi

For Appellant: Shri Rakesh JoshiFor Respondent: Ms. S. Padmaja
Section 115JSection 143(3)Section 80I

…iability, a Debenture Redemption Reserve cannot be regarded as a reserve for the purpose of Schedule VI to the Companies Act, 1956. In National Rayon Corporation, the Supreme Court followed its earlier decision in Vazir Sultan Tobacco Co. Ltd. Vs. CIT [[1981] 132 ITR 559], in holding that since the concept of reserve and of a provision is well known in commercial accountancy and is used in the Companies Act, 1956, while dealing with the preparation of balance sheets and profit and loss accounts the meaning of that concept would have to be gathered from the meaning attached in the Companies Act itself. The mere fa…

Wellknown Polyester Ltd, Mumbai vs. DCIT Cen Cir 7(4), Mumbai

ITA 5849/MUM/2016[2013-14]Status: DisposedITAT Mumbai13 Jun 2018AY 2013-14

Bench: Shri G.S. Pannu & Shri Ram Lal Negi

For Appellant: Shri Rakesh JoshiFor Respondent: Ms. S. Padmaja
Section 115JSection 143(3)Section 80I

…iability, a Debenture Redemption Reserve cannot be regarded as a reserve for the purpose of Schedule VI to the Companies Act, 1956. In National Rayon Corporation, the Supreme Court followed its earlier decision in Vazir Sultan Tobacco Co. Ltd. Vs. CIT [[1981] 132 ITR 559], in holding that since the concept of reserve and of a provision is well known in commercial accountancy and is used in the Companies Act, 1956, while dealing with the preparation of balance sheets and profit and loss accounts the meaning of that concept would have to be gathered from the meaning attached in the Companies Act itself. The mere fa…

Wellknown Polyester Ltd, Mumbai vs. DCIT Cen Cir 7(4), Mumbai

ITA 5848/MUM/2016[2012-13]Status: DisposedITAT Mumbai13 Jun 2018AY 2012-13

Bench: Shri G.S. Pannu & Shri Ram Lal Negi

For Appellant: Shri Rakesh JoshiFor Respondent: Ms. S. Padmaja
Section 115JSection 143(3)Section 80I

…iability, a Debenture Redemption Reserve cannot be regarded as a reserve for the purpose of Schedule VI to the Companies Act, 1956. In National Rayon Corporation, the Supreme Court followed its earlier decision in Vazir Sultan Tobacco Co. Ltd. Vs. CIT [[1981] 132 ITR 559], in holding that since the concept of reserve and of a provision is well known in commercial accountancy and is used in the Companies Act, 1956, while dealing with the preparation of balance sheets and profit and loss accounts the meaning of that concept would have to be gathered from the meaning attached in the Companies Act itself. The mere fa…

DCIT CC 7(4), Mumbai vs. Well Known Polysters P.Ltd, Mumbai

ITA 5498/MUM/2016[2009-10]Status: DisposedITAT Mumbai13 Jun 2018AY 2009-10

Bench: Shri G.S. Pannu & Shri Ram Lal Negi

For Appellant: Shri Rakesh JoshiFor Respondent: Ms. S. Padmaja
Section 115JSection 143(3)Section 80I

…iability, a Debenture Redemption Reserve cannot be regarded as a reserve for the purpose of Schedule VI to the Companies Act, 1956. In National Rayon Corporation, the Supreme Court followed its earlier decision in Vazir Sultan Tobacco Co. Ltd. Vs. CIT [[1981] 132 ITR 559], in holding that since the concept of reserve and of a provision is well known in commercial accountancy and is used in the Companies Act, 1956, while dealing with the preparation of balance sheets and profit and loss accounts the meaning of that concept would have to be gathered from the meaning attached in the Companies Act itself. The mere fa…

DCIT CC 7(4), Mumbai vs. Well Known Polysters P.Ltd, Mumbai

ITA 5497/MUM/2016[2010-11]Status: DisposedITAT Mumbai13 Jun 2018AY 2010-11

Bench: Shri G.S. Pannu & Shri Ram Lal Negi

For Appellant: Shri Rakesh JoshiFor Respondent: Ms. S. Padmaja
Section 115JSection 143(3)Section 80I

…iability, a Debenture Redemption Reserve cannot be regarded as a reserve for the purpose of Schedule VI to the Companies Act, 1956. In National Rayon Corporation, the Supreme Court followed its earlier decision in Vazir Sultan Tobacco Co. Ltd. Vs. CIT [[1981] 132 ITR 559], in holding that since the concept of reserve and of a provision is well known in commercial accountancy and is used in the Companies Act, 1956, while dealing with the preparation of balance sheets and profit and loss accounts the meaning of that concept would have to be gathered from the meaning attached in the Companies Act itself. The mere fa…

DCIT CC 7(4), Mumbai vs. Well Known Polysters P.Ltd, Mumbai

ITA 5496/MUM/2016[2008-09]Status: DisposedITAT Mumbai13 Jun 2018AY 2008-09

Bench: Shri G.S. Pannu & Shri Ram Lal Negi

For Appellant: Shri Rakesh JoshiFor Respondent: Ms. S. Padmaja
Section 115JSection 143(3)Section 80I

…iability, a Debenture Redemption Reserve cannot be regarded as a reserve for the purpose of Schedule VI to the Companies Act, 1956. In National Rayon Corporation, the Supreme Court followed its earlier decision in Vazir Sultan Tobacco Co. Ltd. Vs. CIT [[1981] 132 ITR 559], in holding that since the concept of reserve and of a provision is well known in commercial accountancy and is used in the Companies Act, 1956, while dealing with the preparation of balance sheets and profit and loss accounts the meaning of that concept would have to be gathered from the meaning attached in the Companies Act itself. The mere fa…

Perstorp Chemicals India P.Ltd, Navi Mumbai vs. ITO 10(2)(2), Mumbai

Appeal is partly allowed

ITA 4364/MUM/2012[2007-08]Status: DisposedITAT Mumbai03 Jan 2018AY 2007-08
For Appellant: Shri Mayur KisnadwalaFor Respondent: S/Shri V. Jenardhanan -DR
Section 254(1)Section 92

…ity, a Debenture Redemption Reserve cannot be regarded as a reserve for the purpose of Schedule VI to the Companies Act, 1956. In National Rayon Corpn. Ltd. (supra) the Supreme Court followed its earlier decision in Vazir Sultan Tobacco Co. Ltd. v. CIT [1981] 132 ITR 559 II Taxman 28, in holding that since the concept of reserve and of a provision is well known in commercial accountancy and is used in the Companies Act, 1956, while dealing with the preparation of balance sheets and profit and loss accounts the meaning of that concept would have to be gathered from the meaning attached in the Companies Act itself.…

Rachana Finance & Invesment P.Ltd, Mumbai vs. ITO WD 9(3)(4), Mumbai

In the result, both the appeals of assessees’ are allowed

ITA 5817/MUM/2015[2012-13]Status: DisposedITAT Mumbai31 May 2017AY 2012-13

Bench: Sri Mahavir Singh, Jm & Sri N.K. Pradhan, Am

Section 115JSection 143(3)(ii)

…t, 1956. In National Rayon Corpn. Ltd. (supra) the Supreme Page 5 of 8 ITA No.5817& 5816/Mum/2015 Rachana Finance & Investment P. Ltd. Repute Properties P. Ltd. (A.Y:2012-13) Court followed its earlier decision in Vazir Sultan Tobacco Co. Ltd. v. CIT [1981] 132 ITR 559 /7 Taxman 28, in holding that since the concept of reserve and of a provision is well known in commercial accountancy and is used in the Companies Act, 1956, while dealing with the preparation of balance sheets and profit and loss accounts the meaning of that concept would have to be gathered from the meaning attached in the Companies Act itself.…

Repute Properties P.Ltd, Mumbai vs. ITO WD 9(3)(4), Mumbai

In the result, both the appeals of assessees’ are allowed

ITA 5816/MUM/2015[2012-13]Status: DisposedITAT Mumbai31 May 2017AY 2012-13

Bench: Sri Mahavir Singh, Jm & Sri N.K. Pradhan, Am

Section 115JSection 143(3)(ii)

…t, 1956. In National Rayon Corpn. Ltd. (supra) the Supreme Page 5 of 8 ITA No.5817& 5816/Mum/2015 Rachana Finance & Investment P. Ltd. Repute Properties P. Ltd. (A.Y:2012-13) Court followed its earlier decision in Vazir Sultan Tobacco Co. Ltd. v. CIT [1981] 132 ITR 559 /7 Taxman 28, in holding that since the concept of reserve and of a provision is well known in commercial accountancy and is used in the Companies Act, 1956, while dealing with the preparation of balance sheets and profit and loss accounts the meaning of that concept would have to be gathered from the meaning attached in the Companies Act itself.…

Srei Infrastructure Finance Limited vs. Additional Commissioner of Income Tax

The appeal is dismissed

ITA - 371 / 2012HC Delhi13 Feb 2015
Section 260ASection 32

…of India Act, 1934, is in fact a liability and not a reserve. Reliance is placed upon decision of the Supreme Court in National Rayon Corporation Vs. Commissioner of Income Tax (1997) 227 ITR 764 (SC), and Vazir Sultan Tobacco Company Ltd. Vs. CIT (1981) 132 ITR 559 (SC). Secondly, it is submitted that in terms of Section 45-IC of the Reserve Bank of India Act, 1934, the appellant-assessee does not have any title over the reserve and, therefore, it is a case of diversion of income at source. Reliance is placed upon several decisions relating to Molasses Storage Fund, namely, DCM Ltd. Vs. Commissioner…

Srei Infrastructure Finance Ltd

The appeal is dismissed

ITA/371/2012HC Delhi13 Feb 2015
Section 260ASection 32

…of India Act, 1934, is in fact a liability and not a reserve. Reliance is placed upon decision of the Supreme Court in National Rayon Corporation Vs. Commissioner of Income Tax (1997) 227 ITR 764 (SC), and Vazir Sultan Tobacco Company Ltd. Vs. CIT (1981) 132 ITR 559 (SC). Secondly, it is submitted that in terms of Section 45-IC of the Reserve Bank of India Act, 1934, the appellant-assessee does not have any title over the reserve and, therefore, it is a case of diversion of income at source. Reliance is placed upon several decisions relating to Molasses Storage Fund, namely, DCM Ltd. Vs. Commissioner…

Commnr. of Income Tax, Trivandrum vs. M/S Tranvancore Titanium Products Ltd

C.A. No.-003825-003825 - 1999Supreme Court07 Dec 2000
For Respondent: M/S. TRANVANCORE TITANIUM PRODUCTS LTD
Section 18Section 256(1)

…n Pieco Electronics (supra) has been overturned by this Court in National Rayon Corporation Ltd. v. Commissioner of Income-tax ([1997] 227 ITR 764). Relying upon Vazir Sultan Tobacco Co. Ltd. v. Commissioner of Income-tax, A.P. ([1981] 132 ITR 559) the Court rejected the contention that if the redemption or appropriation of a sum out of profits and surpluses was for a unknown liability or for a liability which did not exist on the relevant date, it must be regarded as a reserve. The contention was held to be fallacious. The expressions ‘provision’ and ‘reserve’ have not…

2Tate Bank of Patiala, Patiala vs. Commissioner of Income Tax, Patiala

The appeals are allowed

C.A. No.-004270-004273 - 1996Supreme Court15 Mar 1996
For Respondent: THE COMMISSIONER OF INCOME-TAX,PATIALA

…t, in answering the questions referred to it, by judgment dated 27.7.1992, adverted to the landmark decisions of this Court in Metal Box_Co. of India Ltd. Vs. Their workmen (73 ITR 53), Vazir Sultan Tobaco Co. Ltd. Vs Commissioner of Income-Tax, A.P. (132 ITR 559), Commissioner of Income-Tax, Kanpur vs. Elgin Mills Ltd. (161 ITR 733) and C.I.T. Vs. Saran Engineering Co. Ltd. (161 ITR 741), and stated thus:- "Thus, where a fund has been created to meet a liability which has actually arisen and jis known on the date of the preparation of the balance-sheet, it…