1983 (5) TMI 53 - AT - Income Tax

Summary

Issues:
1. Disallowance of deduction for surcharge levied by the ITO based on the deposit made by the assessee under the Companies Deposits Scheme in 1976.

Detailed Analysis:
The main issue in this case revolved around the disallowance of the assessee's claim for deduction of surcharge by the Income Tax Officer (ITO). The assessee had made a deposit of Rs. 15 lakhs under the Companies Deposits (Surcharge on Income-tax) Scheme, 1976, on 15-12-1976. The ITO disallowed the claim stating that the deposit should have been made before 15-12-1976 to be eligible for the deduction of surcharge. The ITO relied on the provisions of the Finance Act, 1976, and a Board's circular which emphasized the importance of making the deposit before the last installment of advance tax was due. Consequently, the ITO negatived the assessee's claim for deduction of surcharge.

The Commissioner (Appeals) upheld the ITO's decision, stating that the provisions of the 1976 Act were applicable in this case. The Commissioner referred to the Board's circular and highlighted that the deposit should have been made before the last installment was due, which, in this case, was 15-12-1976. Since the deposit was made on 15-12-1976 and not before, the Commissioner justified the ITO's decision to disallow the deduction of surcharge. The Commissioner's decision was based on the interpretation of the Act and the circular, emphasizing the timing of the deposit as a crucial factor for eligibility for the deduction.

Upon further appeal, the Appellate Tribunal considered the provisions of the Finance (No. 2) Act, 1977. The Tribunal noted that under this Act, if a company made a deposit during the financial year 1976-77 under the Companies Deposits Scheme, the amount deposited would be set off against the surcharge payable for the assessment year 1977-78. The Tribunal also referred to the Board's circular, which clarified that a company could make a deposit at any time during the financial year 1976-77, and the surcharge payable for the subsequent assessment year would be reduced by the deposit made. Since the assessee had made the deposit within the financial year 1976-77, the Tribunal held that the assessee was entitled to the benefit of set off against the surcharge payable for the assessment year 1977-78. Consequently, the Tribunal reversed the decisions of the lower authorities and partly allowed the appeal by the assessee.