1970 (11) TMI 28 - HC - Income Tax

Income accruing in Indian States - method of calculation of super-tax - whether the method of computation adopted by the Tribunal is correct or the one adopted by the assessee is correct - held that effect of section 17(3) is to be given after proportionately increasing the super-tax under section 17(4)(a) of the Income-tax Act, 1922

Summary

Issues:
1. Method of computation of super-tax under section 17 of the Indian Income-tax Act.
2. Sequence of calculation under section 17(3) and section 17(4)(a) for determining super-tax.

Detailed Analysis:

Issue 1: Method of computation of super-tax under section 17 of the Indian Income-tax Act
The High Court was tasked with determining whether the method of computation adopted by the Tribunal or the one insisted upon by the assessee was correct for calculating super-tax under section 17 of the Indian Income-tax Act. The Tribunal's method involved a detailed calculation based on the provisions of section 17(4), taking into account both British India income and income from Indian States. The Tribunal's calculation resulted in a super-tax payable amount of Rs. 3,747. On the other hand, the assessee advocated for a different method which included separate calculations for super-tax on reduced income and total income, resulting in a lower super-tax payable amount of Rs. 2,625. The Court examined the provisions of section 17(3) and section 17(4)(a) to determine the correct approach. The Court concluded that the method adopted by the Tribunal, which involved first determining super-tax under section 17(4)(a) and then applying the provisions of section 17(3) to exclude super-tax on State income at the determined average rate, was the correct method. Therefore, the Court validated the computation method adopted by the Tribunal for calculating super-tax under section 17 of the Income-tax Act.

Issue 2: Sequence of calculation under section 17(3) and section 17(4)(a) for determining super-tax
The principal question before the High Court was the sequence in which the calculation should be made under section 17(3) and section 17(4)(a) for determining super-tax. After a thorough examination of the language of the provisions, the Court held that the super-tax payable by the assessee should first be determined under section 17(4)(a). Once this calculation is completed and the tax rate ascertained, the benefit of section 17(3) should be given to the assessee to exclude super-tax payable on State income at the determined average rate. Therefore, the Court concluded that the correct sequence of calculation is to first determine super-tax under section 17(4)(a) and then apply the provisions of section 17(3) to adjust the super-tax amount accordingly. The Court provided affirmative answers to the questions regarding the validity of the Tribunal's computation method and the sequence of calculations under section 17(3) and section 17(4)(a) as referred for their opinion.

In conclusion, the High Court upheld the method of computation adopted by the Tribunal for calculating super-tax under section 17 of the Indian Income-tax Act and clarified the correct sequence of calculations under section 17(3) and section 17(4)(a) for determining super-tax. No costs were awarded in the circumstances of the case.