1992 (3) TMI 155 - AT - Income Tax

Summary

Issues:
1. Interpretation of provisions of the Companies (Profits) Surtax Act, 1964 and Interest-tax Act, 1974.
2. Treatment of interest-tax payable by a banking company in Income-tax and Surtax assessments.

Analysis:

The judgment involves appeals by the assessee against the Commissioner of Income-tax's order under section 16(1) of the Companies (Profits) Surtax Act, 1964. The issue at hand relates to the treatment of interest-tax payable by the assessee, a banking company, in both Income-tax and Surtax assessments. The Income-tax assessments allowed deduction for interest-tax payable under the Interest-tax Act, 1974. However, the Commissioner found the Surtax assessments erroneous, as they did not adjust for the interest-tax deduction. The Commissioner contended that the Interest-tax Act overrides the Income-tax Act in allowing this deduction, hence, the interest-tax deduction should not be considered for Surtax computation.

The assessee argued that the Surtax Act does not empower the Department to interfere with total income determined under the Income-tax Act. Additionally, the assessee claimed that interest-tax is deductible under section 37 of the Income-tax Act due to being paid for banking business purposes. However, the Commissioner disregarded these arguments and directed the re-computation of Surtax without considering the interest-tax deduction. The Tribunal reviewed the legal position and disagreed with the Commissioner's decision, emphasizing that the Interest-tax Act's provisions prevail over the Income-tax Act concerning interest-tax deduction for scheduled banks.

The Tribunal highlighted the legislative intent behind the Interest-tax Act, which allows interest-tax deduction for scheduled banks. The judgment referenced the non obstante clause in section 18 of the Interest-tax Act, which overrides the Income-tax Act, indicating a constructive amendment. Moreover, the Tribunal cited legal precedents to support the principle that a special Act like the Interest-tax Act prevails over a general Act like the Income-tax Act. The judgment concluded that the interest-tax deduction should not be excluded from Surtax computation, as it is lawfully allowed under the Interest-tax Act.

In light of the above analysis, the Tribunal canceled the Commissioner's order and allowed the appeals, holding that the interest-tax deduction should be considered in the Surtax computation.