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Issues:
1. Computation of capital base for surtax assessment. Analysis: The case involved appeals by the department against the assessee-company regarding the computation of the capital base for surtax assessment. The appellant, a non-resident shipping company based in Sweden, filed surtax returns for the assessment years 1977-78 to 1979-80. The company claimed that its entire world capital was invested in Indian operations due to losses in non-Indian operations. The dispute arose over the method of determining the capital attributable to Indian income, with the appellant following rule 4 of the Second Schedule, while the Income Tax Officer (ITO) used a different ratio based on Indian operating revenue and world operating revenue. The Commissioner (Appeals) sided with the appellant, leading to the department's appeals. The departmental representative argued that the Commissioner erred in directing the capital computation based on the proportion of Indian income to world income. The representative contended that the Surtax Officer's method was correct. On the other hand, the authorized representative supported the Commissioner's conclusion. Rule 4 of the Second Schedule was central to the dispute, stating the method for computing capital when a part of a company's income is not included in its total income under the Income-tax Act. However, the introduction of section 44B from April 1, 1976, made the conditions for applying rule 4 no longer relevant for non-resident shipping companies. Therefore, the Tribunal held that rule 4 could not be used for capital computation for such companies, directing the Surtax Officer to recompute the capital based on other applicable rules. The Tribunal rejected the department's argument that following its direction would put the revenue in a worse position, citing the duty to correct errors in the appeal proceedings. Referring to a Supreme Court decision, the Tribunal emphasized its authority to issue appropriate directions for fresh disposal of the matter. Consequently, the Tribunal set aside the Commissioner's order for different reasons, allowing the appeals for statistical purposes.
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