1994 (11) TMI 46 - HC - Income Tax

Chargeable Profits, Computation Of Capital, Construction Beneficial To Assessee, Income Tax Act, Taxing Statutes

Summary

Issues Involved:
1. Computation of capital for the purpose of the Companies (Profits) Surtax Act, 1964, in relation to relief under section 80J of the Income-tax Act.
2. Deductibility of surcharge while computing chargeable profits under the Companies (Profits) Surtax Act, 1964.

Issue-wise Detailed Analysis:

Issue 1: Computation of Capital for Surtax Act in Relation to Section 80J Relief

Relevant Question:
"Whether, on the facts and in the circumstances of the case, in the computation of the capital for purpose of the Companies (Profits) Surtax Act, 1964, in terms of rule 4 of the Second Schedule, an amount in proportion to the relief allowed to the assessee under section 80J of the Income-tax Act, in the corresponding assessment to income-tax had to be deducted in assessment to surtax for the assessment year 1977-78?"

Judgment Summary:
The court noted that the controversy in this question is covered in favor of the assessee by the Supreme Court decision in Second ITO v. Stumpp Schuele and Somappa P. Ltd. [1991] 187 ITR 108. Following this precedent, the court answered the question in the negative and in favor of the assessee. This means that the relief allowed under section 80J of the Income-tax Act should not be deducted in the assessment to surtax.

Issue 2: Deductibility of Surcharge in Computing Chargeable Profits

Relevant Question:
"Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the surcharge though not levied in the assessee's case was deductible while computing the chargeable profits under the Companies (Profits) Surtax Act?"

Judgment Summary:
The court examined whether the deposit made by the assessee with the Industrial Development Bank of India (IDBI) in lieu of surcharge should be treated as "surcharge on income-tax" for the purpose of deduction in the computation of chargeable profits under rule 2 of the First Schedule to the Surtax Act. The Tribunal had accepted the assessee's claim, but the Revenue challenged this decision.

The court analyzed the provisions of the Finance Act, 1976, and the Surtax Act, concluding that the deposit with IDBI is not a mode of payment of surcharge but rather a means to relieve the assessee from the levy of surcharge. The court emphasized that the deposit nullifies the surcharge liability rather than discharging it. Therefore, it cannot be treated as payment of "surcharge on income-tax."

The court also addressed the assessee's arguments based on the principles of reasonable and beneficial interpretation, stating that these principles do not apply as the language of section 2(8) of the Finance Act is clear and unambiguous.

In conclusion, the court answered question No. 2 in the negative and in favor of the Revenue, indicating that the surcharge, though not levied, is not deductible in computing the chargeable profits under the Surtax Act.

Final Order:
Under the facts and circumstances of the case, there shall be no order as to costs.