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TMI Blog1982 (8) TMI 110X X X X Extracts X X X X X X X X Extracts X X X X ..... e-tax payable in respect of certain items. The amount of income-tax payable by a company in respect of the total income under the provisions of the 1961 Act includes surcharge payable as stipulated by the annual Finance Acts. 2. The Finance Act, 1976 has introduced a scheme by which certain relief was sought to be given in respect of companies which are required to pay surcharge. By clause (8) of section 2 the Finance Act, 1976 provided that where an assessee, being a company, makes, during the financial year commencing on 1-4-1976, any deposit with the Industrial Development Bank of India under any scheme made by the Central Government in this behalf, then, the surcharge on income-tax payable by the company for the assessment year commencing on 1-4-1977 in a case where the amount of deposit is equal to or exceeds the amount of surcharge on income-tax payable by it, shall be nil, and in a case where the amount of the deposit so made falls short of the amount of surcharge on income-tax payable by it, shall be reduced by the amount of the deposit. That is to say, if a company makes a deposit with the Industrial Development Bank of India, an amount equal to surcharge payable on its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessment by withdrawing the deduction allowed for surcharge. That is to say, what was objected to by the assessee as not rectifiable by treating as a mistake apparent from record, was sought to be overcome by proposing an enhancement in the reassessment. The Commissioner (Appeals) accepted the plea of the ITO and after recording his reasons as to why he was not able to agree with the assessee's contention that the deposit of tax could not be regarded as equivalent to payment of surcharge, directed the ITO to enhance the assessment by withdrawing the deduction allowed towards surcharge. In this view of the matter, he regarded the appeal filed against the order of rectification as infructuous. 5. Aggrieved by these orders, the assessee appealed to the Tribunal. During the course of hearing of these appeals, the assessee contended that the proposed enhancement was not correct, that the payment made was in lieu of surcharge and, therefore, was equivalent to surcharge. The withdrawal of the deduction allowed for surcharge paid is thus, wrong. There is also a decision given by the Tribunal Delhi Bench, in ST Appeal No. 17 (Delhi) of 1979 dated 12-8-1980 [since reported in STO v. D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been used, the expression 'in lieu of' construed grammatically must mean the surcharge and deposit should have the same character and, thus, are one and the same. Merely because it is described as a deposit and merely further because it is a deposit which is returnable, it does not cease to be in lieu of payment of surcharge. When a deposit has been made in lieu of surcharge, the liability to pay surcharge ceases. Merely because on the cessation of that liability to pay surcharge, the deposit made does not lose its character as surcharge. A concession conferred on an assessee, whatever may be its object, must be taken to its logical consequences, and a person who made the deposit in lieu of surcharge must be deemed to have paid the surcharge also, because both deposit and surcharge were the imposts under the statute, having the same effect of withdrawing the money and mobilising the resources for the State, and consequently, have the same effect as surcharge. Therefore, the amount of surcharge deposit paid must be aggregated with the income-tax payable by the assessee so that the total amount is allowed as deduction in arriving at the chargeable profits. 7. These attractive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under which an equivalent of deposit is to be made with the Industrial Development Bank of India for a period of five years. That measure is also intended to secure rotation of funds available for corporate sector for investment. Since the object of introducing this Scheme is to exempt companies from paying surcharge, if they pay equivalent amount with the Industrial Development Bank of India, the simple question would be that the deposit is not equivalent to surcharge, because the companies who made the deposit secure exemption from the payment of surcharge. If a company makes before the last instalment of advance tax is due, a deposit with the Industrial Development Bank of India under a scheme to be framed by the Central Government in this behalf, the amount of surcharge payable by it shall be reduced by the amount of the deposit. Normally the surcharge is payable only after an assessment is made, along with the income-tax. But, by making a deposit in advance, the liability to pay the surcharge is reduced and if the deposit is equal to the amount of surcharge payable, there is no liability to pay the surcharge at all. Similarly, where a company makes a deposit during the financ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payment of surcharge on income-tax under sub-section (8) of section 2 of the Finance Act, 1976 (66 of 1976), may be made by a company at any time during the financial year commencing on the 1st day of April, 1976. (3) A deposit under sub-paragraph (1) or sub-paragraph (2) may be made either in one lump sum or in two or more instalments." It is by laying emphasis on the expression 'in lieu of payment of surcharge' that Shri K. S. Paripoornan argued at some length that the making of a deposit was nothing but paying surcharge. It is to understand this provision that we had a close look at the object of introducing this provision of making a deposit with reference to the speech made by the Hon'ble Finance Minister in the Parliament. Since the object of introducing the scheme for making a deposit was to exempt companies from paying surcharge, the paying of surcharge cannot be construed with the expression 'in lieu of' used in paragraphs 3(1) and 3(2) which will have the effect of converting the deposit into surcharge. Moreover, there is more to be said in favour of the argument that a deposit is not a tax because the nature of the two is so different. While one is returnable, the ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epted the plea of the ITO for enhancement of the assessment. Since the appeal filed against the order under section 13 has been dismissed by the Commissioner (Appeals) as infructuous, we endorse the view of the Commissioner (Appeals) thereon also. 12. In the result, both these appeals are dismissed. Per Kum. M. Fatima Beebi, Judicial Member --- I agree with the conclusions drawn by the Vice President. I may, however, briefly state my reasons why a contrary view held by the Delhi Bench of the ITAT to which I have been a party requires to be reconsidered. 2. The decision of the Delhi Bench in the case of Daulat Ram Dharambir Auto (P.) Ltd. was rendered on the wrong assumption that for the assessment year 1977-78 the income-tax payable by the assessee-company therein included surcharge on income-tax payable without noticing the effect of the proviso to section 2(1) of the Finance (No. 2) Act, 1977. What is deductible under rule 2 to the First Schedule appended to the Act, is the amount of income-tax payable by the company in respect of its total income under the provisions of the 1961 Act after making allowance for any relief, rebate or deduction in respect of income-tax to wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e main enactment. Accordingly, in the case of a company which has made a deposit under the scheme, there would be no increase in the income-tax payable by it by a surcharge or the increase by way of surcharge would be reduced proportionately to the amount of the deposit made. Consequently, the income-tax payable at the basic rate by the company that has made the deposit under the Scheme is not increased by a surcharge to the extent of the deposit and, therefore, the amount of income-tax payable by that company does not include surcharge on income-tax payable by it. The deposit under the Scheme is only a condition precedent for getting the benefit of the proviso exempting the case from the charge of surcharge. 5. This being the effect of the proviso to section 2(1), the assessee-company cannot claim that the deposit made under the Scheme is equivalent to payment of surcharge. Even if the provisions of the Finance Act, 1976 are to be considered relevant, it is significant that the words 'in lieu of' particularly emphasized by the assessee's learned counsel, appear only in clause (6) of section 2 and not in clause (8). This is material because clause (8) lays down prospectively the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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