1985 (1) TMI 86 - AT - Income Tax

Summary

Issues:
- Appeal against revisional orders passed by CIT, Karnataka
- Computation of chargeable profits and deduction under 80G relief
- Application of r. 4 of the Second Schedule to the Companies (Profits) Surtax Act
- Jurisdiction of CIT under s. 16(1) of the Companies (Profits) Surtax Act

Analysis:
The appeal was filed by the assessee against the revisional orders passed by the CIT, Karnataka, regarding the computation of chargeable profits and the deduction under 80G relief. The Surtax Officer had deducted a certain amount as a donation under r. 1(vii) of the First Schedule to the Companies (Profits) Surtax Act, which was excluded from the total income of the assessee. The CIT believed that the capital should be reduced proportionately according to r. 4 of the Second Schedule, but the Surtax Officer did not apply this rule and computed the capital differently. The CIT found the assessment erroneous and prejudicial to revenue, leading to the revision of the order. The assessee challenged this revision before the Tribunal.

During the proceedings, the counsel for the assessee referred to a decision of the Karnataka High Court, stating that deductions under the IT Act, such as 80G relief, should not be considered while applying r. 4 of the Second Schedule. The departmental representative argued that administrative directions allowed the department to continue assessing despite adverse High Court decisions, but collection should be stayed until the Supreme Court decides on the matter. The Tribunal held that the CIT's assumption of jurisdiction was incorrect based on the High Court's decision and overturned the revisional orders. The specific direction by the CBDT was not presented, leading to the rejection of the department's argument. Consequently, the Tribunal allowed the appeal and restored the Surtax Officer's order.

In conclusion, the Tribunal ruled in favor of the assessee, setting aside the CIT's revisional orders and restoring the original assessment made by the Surtax Officer. The decision was based on the interpretation of relevant rules and the lack of specific administrative directions supporting the CIT's actions.