These six appeals have been filed by K.C.P. Ltd. of Vuyyuru against common orders of Commissioner (Appeals), Hyderabad, for assessment years 1972-73 and 1975-76 to 1979-80. 2. assessee is company liable to surtax under Companies (Profits) Surtax Act, 1964 ('the Surtax Act'). first common point for assessment years 1972-73, 1975-76, 1976-77 and 1977-78 relates to jurisdiction of ITO for redoing assessments under section 8 of Act. This ground was, however, not pressed during hearing and it is, accordingly, dismissed. 3. next common ground for all years relates to question of manner of treatment to be accorded to Quarry Land Amortisation Reserve shown in balance sheet in same name at Rs. 21,700 for assessment year 1972-73, Rs. 1,05,500 for assessment year 1975-76, Rs. 1,29,500 for remaining four years. assessee's accounting year is year ending on 30th June. question for consideration is whether said reserve styled as reserve should be taken as reserve and, therefore, form part of capital base or should be taken as provision, as contended by ITO. Schedule II to Surtax Act prescribes mode of computation of capital base as including capital and reserve among other things. ITO would, however, seek to exclude same on ground that Explanation to rule 1 of Schedule II provides exemption. said Explanation reads as under: " For removal of doubts it is hereby declared that any amount standing to credit of any account in books of company as on first day of previous year relevant to assessment year which is of nature of item (5) or item (6) or item (7) under heading 'RESERVES AND SURPLUS' or of any item under heading 'CURRENT LIABILITIES AND PROVISIONS' in column relating to 'LIABILITIES' in 'FORM OF BALANCE SHEET' given in Part I of Schedule VI of Companies Act, 1956 (1 of 1956), shall not be regarded as reserve for purposes of computation of capital of company under provisions of this Schedule. " According to this Explanation, reserves falling under item 5 or 6 or 7 of Reserves and Surplus on liabilities side of Form of Balance Sheet given in Part I of Schedule VI to Companies Act, cannot be treated as reserve. Item 5 deals with surplus in profits and loss account, while item 6 deals with proposed additions to dividends. Items 5 and 6 do not apply and they have not been applied. Item 7, dealing with 'sinking fund', has been sought to be applied by ITO. Quarry being wasting asset, provision of sinking fund is not uncommon accountancy practice. ITO, therefore, took view that this reserve should be treated as sinking fund and it was for this reason that he excluded same from computation of capital. first appellate authority concurred with him on ground that assessee holds leases over number o f mines for extracting limestone for manufacture of cement. Since it is wasting asset, he was of view that it was prudent on part of assessee to provide for future needs with view to replace loss. description as reserve cannot by itself help assessee; according to him, as it was meant as provision. assessee is in second appeal. 4. learned counsel for assessee referred us to definition of 'sinking fund' in Pickle's Accountancy. He pointed out that this is definition in any standard work. This definition requires that in order that something may be described as sinking fund, it should be reckoned with reference to amounts required to replace asset at end of its effective life. Further, mere provision in accounts is not enough inasmuch as equal sum should be provided for investment so that amount invested along with its accretion will be sufficient to replace asset. In assessee's case, it was ad hoc allocation. Besides, there was no corresponding investment. Provision, it is pointed out, is intended to cover liability, which has accrued. He also referred to decision of Supreme Court in case of Vazir Sultan Tobacco Co. Ltd. v. CIT [1981] 132 ITR 559, which has brought out difference between reserve and provision. guidelines provided in said decision, it was claimed, also will support his case. learned counsel argued that it was written back to profits and loss account in 1982. learned departmental representative, on other hand, claimed that assessee has provided for same. It was clearly styled as Quarry Land Amortisation Reserve. Quarry is wasting asset. It was exploited during year. It is claimed now to be ad hoc allocation. He claimed that there is no reason why it should be treated so. directors should presume to have applied their mind and made proper allocation and shareholders have approved such allocation. He urged that fact that it has been earmarked as Quarry Land Amortisation Reserve, makes it sinking fund. fact that it was written back subsequent to these years to profit and loss account during 1982-83, could not, prima facie, make provision into reserve during relevant years. 5. We have carefully considered records as well as arguments. Supreme Court in case of Vazir Sultan Tobacco Co. Ltd. pointed out that meaning assigned to words 'provision' and 'reserve' should be same as under Companies Act. In fact, where explanation is sought to be assigned as in this case, it is amply clear that meaning should be same as under Companies Act. true nature and character of sum appropriated from profits has to be ascertained before finding out whether any particular item can be treated as reserve or provision. authorities are right in canvassing view that mere fact that it is described as reserve, need not lead to conclusion that it is one. However, provision is meant for meeting known liability. It can also be intended to meet 'depreciation or diminution in value of assets'. Hence, assessee is entitled to create provision in respect of its quarries, while exhausting same inasmuch as it is wasting asset. But that does not automatically mean that amount appropriated in this scheme has to be treated as provision in every case. intention and purpose of appropriation has to be reckoned from surrounding circumstances. In this case, amount has been earmarked for specific purpose. But that itself is not enough. There should be both intention and conduct on part of directors to use that fund for very purpose. In assessee's case, it is claimed that appropriation in this name was ad hoc one. Such claim is also patent from facts because it was only Rs. 21,700 that was provided in 1972-73. amount stood at Rs. 1,05,500 in assessment year 1975-76 and at Rs. 1,29,000 in assessment year 1976-77. There was no further provision for four more years though exhaustion of quarries continued. It was, subsequently, written back to profit and loss account. Even if subsequent conduct is ignored by us, fact remains that there is no uniform or even any basis inferable for allocation with reference to accounts or any statements of directors or any other objective or subjective criteria. It has been ad hoc allocation. It is also needless to point out that there has been no material to suggest that it was tied-up reserve in sense that there was any obligation cast upon directors either by themselves or by resolution of shareholders to use funds only for amortisation purposes. It is in this context that we must consider it as reserve. In fact, it has been styled as reserve in accounts year after year. assessee being public company and accounts having been approved by shareholders year after year, we cannot ordinarily consider what is described as reserve to be provision unless there are materials to warrant inference that though it has been described as reserve, it is only provision. Apparently, it is for this reason that authorities themselves wanted to treat amount as 'sinking fund'. If it is sinking fund, it gets squarely hit by Explanation. definition of sinking fund in any standard book on accountancy expects that there should be provision on basis that amount provided should be invested in assets so that investment, along with accretion thereof, would meet cost of replacement (less residual value of original asset). There is always fund with its counterpart as investment which are both equal. It is known as sinking or reserve fund only where there is corresponding investment earmarked specifically for replacement of asset for which fund has been created. This is definition given in Pickle's Accountancy, as extracted by assessee for our benefit. Even as pointed out by learned representative for assessee, this is description given in any standard work on Accountancy. Eric L. Kohler in his Dictionary for Accountants, 4th edn., defines 'sinking fund' as under: " Cash or other assets, and interest or other income earned thereon, set apart for retirement of debt, redemption of stock, or protection of investment in depreciable property; sometimes paralleled by sinking fund reserve. sinking fund established for purpose of extinguishing indebtedness or reacquiring capital stock may also be known as redemption fund. " emphasis, it may be seen, is on cash or other assets and not so emphasis, it may be seen, is on cash or other assets and not so much as mere accounting exercise as in assessee's case, where profit and loss appropriation account is debited and reserve account is credited. Nothing more is done by assessee. In fact, it has been written back. It was possible only because it was reserve. Under these circumstances, we find that t h e amount represented by Quarry Land Amortisation Reserve is reserve within ordinary meaning of word 'reserve' or meaning assigned under Companies Act and/or in light of guidelines provided by Supreme Court in Vazir Sultan Tobacco Co. Ltd.'s case. It is certainly not sinking fund inasmuch as none of attributes of sinking fund are apparent in this item. In any view of matter, assessee is entitled to succeed on this ground. ITO is directed to rework assessee's liability by treating these amounts as part of capital base. 6. only remaining item relates to question of treatment of development rebate reserve withdrawn after statutory period of eight years. This dispute relates to assessment years 1976-77 and 1977-78 only. amounts in dispute are Rs. 1,01,37,630 and Rs. 1,38,37,630 for assessment years 1976-77 and 1977-78, respectively. first appellate authority, in rejecting assessee's claim, had followed decision of this Tribunal in Surtax Appeal Nos. 4 and 5 (Hyd.) of 1979, dated 26-3-1980. We, however, understand that Andhra Pradesh High Court has reversed decision of this Tribunal in assessee's own case in Reference Case No. 75 of 1978, dated 14-6-1984 and Reference Case No. 210 of 1982, dated 25-6-1984. Respectfully following said decisions, we hold that on amounts standing as part of development rebate reserve after expiry of 8-year period with which requirement for reserve ends, benefit of treatment as reserve can no longer be denied. ITO is directed to give effect to view of H i g h Court for earlier years after due verification, since assessee succeeds on principle. appeal on this point will also be treated as allowed. 7. In result, appeals are treated as allowed in manner indicated in preceding paragraphs. *** K.C.P. LIMITED v. INCOME TAX OFFICER