1998 (4) TMI 13 - HC - Income Tax

Summary

Issues: Interpretation of provisions for taxation deduction from cost of investments under rule 2 of the Second Schedule.

Analysis:
The case involved the assessment year 1981-82 where the assessee, South India Corporation (Agencies) Limited, contended that provisions for taxation amounting to Rs. 57,86,074 should be deducted from the cost of investments based on a decision of the Calcutta High Court in Duncan Brothers and Co. Ltd. v. CIT [1981] 128 ITR 302. The Income-tax Officer initially rejected this claim, citing that the Calcutta High Court's decision was not final as it was pending before the Supreme Court. However, the Commissioner of Income-tax (Appeals) directed the deduction based on the Calcutta High Court's decision.

Upon further appeal to the Tribunal, the Department challenged the deduction, but the Tribunal dismissed the appeal, upholding the Commissioner's decision. The Tribunal then referred the common question to the High Court regarding the deduction of the provision for taxation from the cost of investments under rule 2 of the Second Schedule.

The High Court noted that the Calcutta High Court's decision in Duncan Brothers and Co. Ltd. v. CIT [1981] 128 ITR 302, which allowed the deduction, was based on an earlier decision that was later reversed by the Supreme Court. Therefore, the High Court ruled that the provision for taxation amounting to Rs. 57,86,074 cannot be deducted from the cost of investments under rule 2 of the Second Schedule. The common question was answered accordingly, and the tax cases were disposed of with no order as to costs.