1995 (4) TMI 115 - AT - Income Tax

Summary

Issues Involved:
1. Relief under the Double Taxation Agreement (DTA) with Singapore.
2. Computation of chargeable profits under the Companies (Profits) Surtax Act, 1964 (C.P.S.T. Act).
3. Quantum of DTA relief in surtax assessment.

Issue-wise Detailed Analysis:

1. Relief under the Double Taxation Agreement (DTA) with Singapore:
The assessee contended that the relief under the DTA with Singapore should apply to surtax as well as income tax. The Commissioner (Appeals) rejected this contention, stating that the point was not raised before the Assessing Officer. The assessee argued that the DTA relief should be extended to surtax because the surtax imposed under the C.P.S.T. Act, 1964, is also considered "Indian Tax" under Article 11(a)(ii) of the Agreement. The Assessing Officer's method of calculation allegedly reduced the DTA relief available to the assessee, discriminating against those who pay surtax.

2. Computation of chargeable profits under the Companies (Profits) Surtax Act, 1964 (C.P.S.T. Act):
The chargeable profits are computed by starting with the total income determined under the Income-tax Act and adjusting it according to the First Schedule of the C.P.S.T. Act. The Assessing Officer allowed a deduction for income-tax payable net of DTA relief, resulting in chargeable profits of Rs. 36,16,046 and surtax payable of Rs. 13,47,079. The assessee argued that the correct chargeable profits should be Rs. 52,23,384, leading to surtax payable of Rs. 11,95,295 before allowing DTA relief.

3. Quantum of DTA relief in surtax assessment:
The assessee contended that the method of calculation adopted by the Assessing Officer reduced the DTA relief available. The Tribunal noted that the DTA Agreement does not modify the provisions of the C.P.S.T. Act. The surtax must first be computed under the C.P.S.T. Act, and then the DTA relief can be applied. The correct computation of chargeable profits, considering the provisions of Rule 2(ii) of the First Schedule, results in chargeable profits of Rs. 52,23,384 and surtax payable of Rs. 11,95,295. The DTA relief should not be applied twice, once in income-tax assessment and again in surtax assessment.

Judgment:
The Tribunal held that the chargeable profits of the assessee are Rs. 52,23,384 and the surtax payable is Rs. 11,95,295. The Assessing Officer is directed to amend the surtax assessment accordingly. The assessee's appeal is allowed.