1979 (1) TMI 13 - HC - Income Tax

Summary

Issues:
1. Computation of super profits tax for a non-resident company regarding interest on securities.
2. Exclusion of interest on advances from Indian concerns for super profits tax computation.

Issue 1: Computation of super profits tax for a non-resident company regarding interest on securities:
The case involved M/s. Banque Nationale De-Paris, a non-resident company, for the assessment year 1963-64. The dispute centered around the exclusion of interest on securities from chargeable profits for super profits tax purposes. The Assessing Officer (AO) included Rs. 2,18,802 as interest income in the total income, but the company argued for its exclusion under Rule I of the First Schedule to the S.P.T. Act, 1963. The AO declined the exclusion, leading to an appeal to the Appellate Authority Commissioner (AAC), who partially allowed the exclusion. The Tribunal upheld the AAC's decision, emphasizing the specific provisions for non-resident companies in Rule I. The High Court analyzed the clauses (vi) and (x) of Rule I, determining that the exclusion under clause (x) applied to the company, as it had not made prescribed dividend arrangements in India. The Court rejected the Revenue's contention and upheld the Tribunal's decision, answering the first question in favor of the assessee.

Issue 2: Exclusion of interest on advances from Indian concerns for super profits tax computation:
Apart from interest on securities, the company received interest on advances from Indian concerns. The dispute arose regarding the exclusion of this interest for super profits tax computation. The AO reduced the interest amount, considering payments made to creditors and depositors. The AAC further reduced the interest amount, considering proportionate expenses and payments made. The Tribunal refrained from addressing the issue of reduction but upheld the AAC's calculations as fair. The High Court, citing a similar case precedent, held that the interest earned should not be scaled down by expenses or payments made. As the company had accepted the calculations and not appealed further, the Court upheld the Tribunal's decision, answering the second question in favor of the assessee.

In conclusion, the High Court ruled in favor of the non-resident company on both issues, affirming the exclusion of interest on securities and interest on advances from Indian concerns for super profits tax computation. The Court directed the Commissioner to pay the costs of the reference to the assessee.