Judgment :- K. A. THANIKKACHALAM J. At the instance of the assessee, the Tribunal referred the following three questions for opinion of this court under section 256(1) of the Income-tax Act, 1961 "1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that under rule 1(xi), only the actual sum of Rs. 27, 000 transferred to the reserve fund during the previous year 1975 should be deducted and not the higher sum of Rs. 1, 23, 000 approved for appropriation after the end of 1975 ? 2. Whether the Tribunal was right in law in holding that the appropriation of the sum of Rs. 1, 23, 000 dated back only to January 1, 1976, and not to the last date in the previous year 1975, i.e., December 31, 1975 ? 3. Whether the Tribunal was right in law in holding that the appropriation of amount to the reserve fund by itself does not tantamount to transfer to the reserve fund within the provisions of section 17(1) of the Banking Regulation Act, as specified in rule 1(xi) of the First Schedule to the Companies (Profits) Surtax Act, 1964 ?" * The assessee was formerly known as South India Bank Limited (Tirunelveli) and for the assessment year 1976-77, the relevant previous year was the calendar year 1975. In the surtax assessment for the above year, the Income-tax Officer had computed the chargeable profits under the First Schedule to the Surtax Act, deduction under rule 1(xi) the sum of Rs. 27, 000 taken as the amount which is transferred during the previous year to the reserve fund under section 17(1) of the Banking Regulation Act, 1949. In doing so, the Income-tax Officer rejected the assessee's contention that the sum of Rs. 1, 23, 000 being the amount appropriated for transfer to the reserve fund by the board's resolution, dated April 24, 1976, passed by the annual general meeting of the shareholders on April 24, 1976, should be deducted and not the lesser sum of Rs. 27, 000. The Commissioner of Income-tax (Appeals) on the assessee's appeal agreed with the Income-tax Officer that only the reserve which has been actually transferred during the previous year alone could be deducted from the total income for the purpose of computing the chargeable profit. 27, 000. The Commissioner of Income-tax (Appeals) on the assessee's appeal agreed with the Income-tax Officer that only the reserve which has been actually transferred during the previous year alone could be deducted from the total income for the purpose of computing the chargeable profit. On further appeal, the Tribunal considering the decision cited before it in CIT v. Mysore Electrical Industries Limited 1971 (80) ITR 566, 1971 (S) SCR 521, 1971 AIR(SC) 1361, 1971 (2) SCC 243 , 1971 (41) CC 617 SC) was of the view that the Income-tax Officer was right in deducting under rule 1(xi), only the actual sum of Rs. 27, 000 transferred by the assessee to the reserve fund during the previous year 1975 and not the higher sum of Rs. 1, 23, 000 which was approved for appropriation by the annual general meeting long after the end of 1975. Accordingly, the assessee's appeal was dismissedBefore us learned counsel for the assessee submitted that the appropriation of Rs. 1, 23, 000 out of the profits for the year 1975 to the reserve fund as recommended by the board's resolution dated April 24, 1976, and approved by the annual general meeting of the shareholders would date back to the last date of the previous year, viz., December 31, 1975, in view of the Supreme Court decisions in CIT v. Mysore Electrical Industries Ltd. 1971 (80) ITR 566, 1971 (S) SCR 521, 1971 AIR(SC) 1361, 1971 (2) SCC 243 , 1971 (41) CC 617 and Indian Tube Co. Pvt. Ltd. v. CIT 1992 (194) ITR 102, 1992 (1) JT 112, 1992 (1) Scale 26, 1992 (1) SCR 22, 1992 (101) CTR 446, 1992 (60) TAXMAN 399, 1992 (101) CTR(SC) 446 It was further submitted that consequently under rule 1(xi) the sum which is transferred to the reserve fund during the previous year will be Rs. 1, 23, 000 even though the appropriation was approved by the annual general meeting on April 24, 1976. On the other hand, learned standing counsel appearing for the Department submitted that section 17(1) of the Banking Regulation Act and rule 1(xi) of the First Schedule to the Surtax Act refer to the reserve fund which means that the fund should be actually possessed of the monies by actual transfer. It is submitted that hence only a sum of Rs. It is submitted that hence only a sum of Rs. 27, 000 which had been actually transferred to the reserve fund before December 31, 1975, can be considered and not the sum of Rs. 1, 23, 000 which would have been transferred to the reserve fund only after April 24, 1976. According to learned standing counsel, the decision cited by learned counsel for the assessee relates to the provisions contained in rule (1) of the Second Schedule to the Surtax Act. Therefore, that decision would not be applicable to the facts arising in this case which have got to be decided after taking into consideration rule 1(xi) of the First Schedule to the Surtax Act along with section 17 of the Banking Regulation Act. We have heard learned counsel for the assessee as well as learned standing counsel for the Department. The assessee is a banking company. The assessment year involved in this tax case is 1976-77, the assessee's previous year being the calendar year 1975. During the accounting year, the assessee actually transferred a sum of Rs. 27, 000 to the reserve fund as per the provisions of section 17(1) of the Banking Regulation Act, 1949. A sum of Rs. 1, 23, 000 was appropriated for transfer to the reserve fund by the board's resolution, dated April 24, 1976, passed by the annual general meeting of the shareholders. According to the assessee, this sum of Rs. 1, 23, 000 should be deducted under rule 1(xi) of the First Schedule to the Surtax ActAccording to sub-clause (5) of section 2 of the Companies (Profits) Surtax Act, 1964, "chargeable profits" means the total income of an assessee computed under the Income-tax Act, 1961 (43 of 1961), for any previous year or years, as the case may be, and adjusted in accordance with the provisions of the First Schedule. Rule 1(xi) of the First Schedule states as under "In the case of a banking company-- (a) any sum which during the previous year is transferred by it to a reserve fund under sub-section (1) of section 17 of the Banking Companies Act, 1949 (10 of 1949) . . ." Therefore, according to the Department, the assessee's contention that the sum of Rs. . ." Therefore, according to the Department, the assessee's contention that the sum of Rs. 1, 23, 000 being the amount appropriated for transfer to the reserve fund by the board's resolution dated April 24, 1976, passed by the annual general meeting of the shareholders should be deducted is not acceptable. According to the Department, only a sum of Rs. 27, 000 which was actually transferred during the previous year to the reserve fund under section 17(1) of the Banking Regulation Act, 1949, alone could be deducted, in view of the provisions contained in rule 1(xi) of the First Schedule to the Surtax Act. Learned counsel for the assessee submitted that in view of the decision rendered by the Supreme Court in Indian Tube Co. Pvt. Ltd. v. CIT 1992 (194) ITR 102, 1992 (1) JT 112, 1992 (1) Scale 26, 1992 (1) SCR 22, 1992 (101) CTR 446, 1992 (60) TAXMAN 399, 1992 (101) CTR(SC) 446 a sum of Rs. 1, 23, 000 appropriated to the reserve fund according to the board's resolution dated April 24, 1976, and approved by the annual general meeting on the same day should be related back to the previous year during the assessment year under consideration and deduction should be given under rule 1(xi) of the First Schedule. It remains to be seen that the decision of the Supreme Court in Indian Tube Co. P. Ltd. v. CIT 1992 (194) ITR 102, 1992 (1) JT 112, 1992 (1) Scale 26, 1992 (1) SCR 22, 1992 (101) CTR 446, 1992 (60) TAXMAN 399, 1992 (101) CTR(SC) 446 relates to rule 1(ii) of the Second Schedule to the Companies (Profits) Surtax Act. Rule 1 of the Second Schedule states as under "1. Subject to the other provisions contained in this Schedule, the capital of a company shall be the aggregate of the amounts, as on the first day of the previous year, relevant to the assessment year of-- (ii) its reserves, if any, created under proviso (b) to clause (vib) of sub-section (2) of section 10 of the Indian Income-tax Act, 1922 (11 of 1922), or under sub-section (3) of section 34 of the Income-tax Act, 1961 (43 of 1961)." * According to rule 1 of the Second Schedule, the capital of a company shall be the aggregate of the amounts as on the first day of the previous year relevant to the assessment year. According to the facts arising in that case, Indian Tube Co. P. Ltd. v. CIT 1992 (194) ITR 102, 1992 (1) JT 112, 1992 (1) Scale 26, 1992 (1) SCR 22, 1992 (101) CTR 446, 1992 (60) TAXMAN 399, 1992 (101) CTR(SC) 446 (SC), in respect of the accounts of the applicant-company for the calendar year 1962, its board of directors, in a meeting held on May 1, 1963, approved the transfer of Rs. 90, 00, 000 out of the profits to the dividend reserve account. In the general meeting held on May 31, 1963, the shareholders declared dividend of Rs. 76, 00, 000, as recommended by the board. The dividend was paid subsequently by transferring a sum of Rs. 76, 00, 000 from the dividend reserve account to the profit and loss appropriation account. A question arose whether the Tribunal was right in holding that a sum of Rs. 76, 00, 000 which was paid as dividend for the year 1962 following the general meeting dated May 31, 1963, out of the dividend reserve of Rs. 90, 00, 000 as on January 1, 1963, was not to be taken into account for the computation of capital as on January 1, 1963, in pursuance of the rules of the Second Schedule to the Companies (Profits) Surtax Act, 1964. While answering this question the Supreme Court held that though the general body of the shareholders resolved and appropriated the sum of Rs. 76, 00, 000 towards dividend from the reserve of Rs. 90, 00, 000 on May 31, 1963, the appropriation related back to the calendar year 1962 to which it related and, as on January 1, 1963, the sum of Rs. 76, 00, 000 was a provision and only Rs. 14, 00, 000 could be treated as a reserve in the computation of capital for the purpose of surtax. Thus, this decision was rendered while interpreting rule 1 of the Second Schedule wherein the wording is different from that occurring in rule 1(xi) of the First Schedule. Reliance was also placed upon a decision of the Supreme Court in the case of CIT v. Mysore Electrical Industries Ltd, 1971 (80) ITR 566, 1971 (S) SCR 521, 1971 AIR(SC) 1361, 1971 (2) SCC 243 , 1971 (41) CC 617. Reliance was also placed upon a decision of the Supreme Court in the case of CIT v. Mysore Electrical Industries Ltd, 1971 (80) ITR 566, 1971 (S) SCR 521, 1971 AIR(SC) 1361, 1971 (2) SCC 243 , 1971 (41) CC 617. According to the facts arising in the abovesaid case, out of the profits of the respondent-company for the accounting period ending March 31, 1963, the directors of the company appropriated the following amounts towards reserves on August 8, 1963 ;(1) Rs. 2, 56, 000 as plant modernisation and rehabilitation reserve ; (2) Rs. 1, 00, 000 as loss of repatriation reserve ; and (3) Rs. 89, 657 as development rebate reserve The question was whether these amounts could be included in computing the capital of the respondent as on April 1, 1965, under rule 1 of Schedule II to the Companies (Profits) Surtax Act, 1964 It is significant to note that rule 1(xi) of the First Schedule contemplates that if any sum should be actually transferred during the previous year to the reserve fund as per the provisions contained in section 17(1) of the Banking Regulation Act, 1949, then alone the assessee would be entitled to ask for deduction under rule 1(xi) of the First Schedule to the Companies (Profits) Surtax Act. In the present case, inasmuch as the sum of Rs. 1, 23, 000 was not actually transferred during the previous year to the reserve fund, the assessee is not entitled to ask for deduction under rule 1(xi). The assessee's contention that the sum of Rs. 1, 23, 000, being the amount appropriated for transfer to the reserve fund by the board's resolution which was approved by the general meeting held on April 24, 1976, should be taken into account as if it was actually transferred during the previous year so as to enable the assessee to claim deduction under rule 1(xi) of the First Schedule cannot be accepted. Accordingly, we see no infirmity in the order passed by the Tribunal in holding that the deduction of Rs. 1, 23, 000 is not possible under rule 1(xi) of the First Schedule to the Companies (Profits) Surtax Act. In that view of the matter, we answer the questions referred to us in the affirmative and against the assessee. No costs.