D.K. Kapur, J.
1. At the instance of the Commissioner of Income-tax the following question have been referred to us under section 256(1) of the Income-tax Act, 1961, for the assessment year 1970-71 :
'1. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was correct in holding that the amount of Rs. 78,00,000 transferred to an account styled as 'contingency reserve' represented a reserve and was deductible from chargeable profits under the Companies (Profits) Surtax Act, 1964
2. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was correct in holding that the amount of Rs. 84,16,116 being the credit balance in an account styled as 'contingency reserve'should be treated as a reserve as on the first day of the previous year in computing the capital of the company for the purposes of the Companies (Profit) Surtax Act, 1964 ?'
2. Similar questions except for the amounts have arisen in past years also. For the assessment year 1963-64, a reference made in respect of the super profits tax assessment of this assessed, the Punjab National Bank Ltd., involved similar questions. It was held that the sums credited in contingency reserve, charity reserve and other similar amounts were 'reserves' as they did not relate to any real existing liability. Similar situation exists in the present assessment. Following that judgment, we answer the questions referred to us in the affirmative. The amounts transferred to contingency reserve are 'reserves'. They have to be treated as such for the purpose of the Companies (Profits) Surtax Act, 1964. Parties will bear their own costs.