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1991 (3) TMI 105 - HC - Income Tax

Issues:
1. Computation of development allowance reserve for surtax assessment.
2. Exclusion of dividend income from chargeable profits under the Surtax Act.

Analysis:

Issue 1: Computation of development allowance reserve for surtax assessment
The case involved the assessment years 1977-78 and 1978-79 of a public limited company owning tea and coffee estates. The dispute arose regarding the treatment of the "development allowance reserve" in the computation of capital under Schedule II to the Surtax Act. The Income-tax Officer initially allowed only 40% of the reserve created by the company to be considered as a reserve. However, the Commissioner of Income-tax (Appeals) and the Income-tax Appellate Tribunal held that the entire reserve should be taken into consideration for the computation of capital. The High Court noted that the Tribunal failed to provide a definite finding on whether the facts of the case were identical to a previous case, Peermedu Tea Co. Ltd.'s case. Therefore, the High Court declined to answer the question but directed the Tribunal to re-examine the issue properly.

Issue 2: Exclusion of dividend income from chargeable profits under the Surtax Act
The second issue revolved around the exclusion of dividend income from the chargeable profits under rule 1(viii) of the First Schedule to the Surtax Act. The Income-tax Officer initially allowed only 40% of the dividend income to be excluded, but the Commissioner of Income-tax (Appeals) directed the exclusion of the entire dividend income based on a previous decision. The Income-tax Appellate Tribunal upheld the Commissioner's decision, rejecting the argument based on section 80AA of the Income-tax Act. The High Court, after considering the relevant legal provisions and precedents, held that the entire dividend income should not be excluded from the income assessed under rule 1(viii) of the First Schedule. The Court answered the question in the negative, against the assessee and in favor of the Revenue, directing the Tribunal to reevaluate the details based on this answer.

In conclusion, the High Court disposed of the references by providing detailed analyses and directions for both issues, emphasizing the need for proper adjudication and compliance with relevant legal provisions and precedents.

 

 

 

 

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