1992 (8) TMI 71 - HC - Income Tax

Summary

Issues:
1. Whether the petitioner-company was entitled to claim deduction on account of surtax paid under section 154 of the Income-tax Act.
2. Whether surtax paid by the petitioner-company was deductible expenditure in computing the company's income from business.

Analysis:
The High Court was presented with a reference under section 256(1) of the Income-tax Act, concerning the entitlement of the petitioner-company to claim a deduction for surtax paid. The petitioner had initially paid income tax and surtax for the relevant assessment years. Subsequently, the petitioner filed applications under section 154 of the Income-tax Act for those years, seeking a deduction for the surtax paid, alleging it was omitted from the original assessments in error.

The Income-tax Officer rejected the applications based on a decision from the Special Bench of the Bombay Tribunal, which stated that surtax liability was not deductible when computing business income. Appeals to the Commissioner of Income-tax (Appeals) and the Income-tax Appellate Tribunal were also unsuccessful, leading to the reference to the High Court under section 256(1).

The High Court noted that several High Courts had ruled against allowing deduction for surtax paid, citing section 40(a)(ii) of the Income-tax Act. Various cases were referenced to support this position. However, the Gauhati High Court had a contradictory decision in Doom Dooma Tea Co. Ltd. v. CIT [1989] 180 ITR 126, where it allowed surtax paid as a deduction. Despite this, the High Court emphasized that the issue was highly debatable, with a majority of courts ruling against the deduction.

Referring to the Supreme Court's decision in T. S. Balaram, ITO v. Volkart Brothers [1971] 82 ITR 50, the High Court concluded that since the matter was debatable and multiple courts had ruled against the deduction, the application under section 154 was not maintainable. The court stated that if the petitioner disagreed with the assessment, they should have pursued an appeal or revision, not an application under section 154.

Consequently, the High Court answered the first question in the affirmative, against the assessee, indicating that the application under section 154 was rightly deemed not maintainable. As a result, the second question did not require an answer. The judgment concluded with each party bearing their own costs.