HON’BLE SUPREME COURT · SOURCE-REVIEWED NOTE
Commissioner of Excess Profits Tax, West Bengal v. Ruby General Insurance Co. Ltd.
Civil Appeal 12 of 1955
[1957] SCR 1002 ·
Excess Profits Tax Act 1940, sections 4, 6 and Schedule II rules 1–2 · Indian Income-tax Act 1922, section 10(7) and Schedule rule 6
Sources & disclosures includedDownload original judgment / order
3-judge bench · N. H. Bhagwati · T. L. Venkatarama Ayyar · J. L. Kapur
Assessment years: Chargeable accounting periods ending 31 December 1940 and 31 December 1941
01 · Facts of the case
The insurer included all non-life premium receipts in capital employed, while reserving 40 per cent for unexpired risks. Revenue sought to deduct that reserve as an accruing liability in the excess-profits capital computation.
Source: Primary report: SCR 1003–1006
02 · Discussion by the Hon’ble Court
Allowance of unexpired-risk provision in computing income-tax profits did not determine its treatment in the different excess-profits capital scheme. Rule 2 liabilities had to relate to effective capital like borrowed money and debts. The contingent reserve liability itself contributed nothing to real trading assets or profit earning.
Source: Primary report: SCR 1011–1018
03 · Judicial decision
Revenue appeal dismissed with costs; reserve for unexpired risks was not an accruing liability deductible under Schedule II rule 2.
Source: Primary report: SCR 1019
04 · Outcome / in whose favour
Assessee succeeded in resisting reduction of capital employed and the resulting increase of excess-profits liability.
Source: Primary report: SCR 1015–1019
05 · AKHB REVIEW POINT
Distinguish deduction in calculating annual profits from deduction in calculating capital employed. The Court did not exclude actual premium receipts from capital; it rejected Revenue’s attempted capital deduction of the reserve liability.
Source: Primary report: SCR 1013–1016
Source & verification
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Statutory scope
Historical legislation expressly identified in this note. This is not a decision under the Income-tax Act, 1961 or the Income-tax Act, 2025. Verify enacted wording, commencement, transition and subsequent judicial treatment independently before modern reliance.
Later treatment
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