1. The assessee is the Universal Fire and General Insurance Co. Ltd., Bombay. Today, after nationalisation of general insurance business, it is one of the subsidiary units of the United India Insurance Co. Ltd. The Assistant General Manager of the United India Insurance Co. Ltd. has addressed a letter dated September 25, 1984, to the Central Government Advocate stating that the assessee (as now amended) is not interested in appearing in the reference or engaging an advocate for assisting the court.
2. We have heard Mr. Jetly for the Commissioner of Income-tax. He has frankly stated that the answer to be given to the question referred to us is governed by a Circular No. I-P (XV-5) issued by the Central Board of Direct Taxes dated January 23, 1968, to be found in  69 ITR 25.
3. A few facts may be stated. We are concerned with the assessment year 1969-70. The assessee was the Universal Fire and General Insurance Co. Ltd., Bombay.
4. The company was incorporated under the Companies Act and was doing general insurance business, including fire and marine insurance. The previous year for the assessment year was the one which ended on December 31, 1968. During the year, the assessee had a reserve of Rs. 24,98,452 under the head 'Departmental Reserves'. These reserves were actually reserves for unexpired risks consisting of three items, viz. :
1. Rs. 99,955.51 pertaining to marine insurance.
2. Rs. 9,68,482.79 pertaining to accident and miscellaneous insurance.
3. Rs. 14,30,014.61 pertaining to fire insurance.
5. The Income-tax Officer has refused to include the said sum of Rs. 24,98,452 while computing the capital base in accordance with the provisions of the Second Schedule to the Companies (Profits) Surtax Act, 1964. However, this was done without any discussion in his order. Aggrieved by this, the assessee carried the matter before the Appellate Assistant Commissioner, who also rejected the claim of the assessee. The assessee then brought the matter by way of second appeal to the Income-tax Appellate Tribunal. The Income-tax Appellate Tribunal, after hearing both the sides, was of the opinion that there could be no doubt that the 'reserves for unexpired risks' could not be regarded as (a) 'reserve' or (b) 'surplus'. According to the Tribunal, however, the same qualified as a 'fund' within the meaning of rule 2(ii) of the Second Schedule to the Companies (Profits) Surtax Act, 1964. The Tribunal was of the further opinion that the said expression 'fund' not having been defined in the said Act, it was to be given its plain ordinary dictionary meaning. Giving such a meaning, the expression 'fund' meant a sum of money available to the assessee for payment or discharge of an unexpected claim. Accordingly, the Tribunal held that the reserves for unexpired risks clearly represented a sum of money available to the assessee for payment or discharge of unexpected claims that might arise in respect of the policies which had been issued and which extended beyond the accounting year under consideration. Accordingly, in the view of the Tribunal, the amount so standing to the credit of these accounts could be regarded as a 'fund' and was liable to be included in the capital computation.
6. Mr. Jetly referred us to clause 2 of the said circular. It would appear to us that the said circular has direct relevance to the question under consideration before us. The Income-tax Officer and the other authorities under the Act, including the Appellate Assistant Commissioner, were bound to act in accordance with the said circular. This is well settled both by the Supreme Court and by several decisions of this court. Accordingly, without any further discussion, we answer the question in the affirmative and in favour of the assessee. There will be no order as to costs of the reference.