9911796707
TMI Blog1983 (10) TMI 38X X X X Extracts X X X X X X X X Extracts X X X X ..... ustified in diminishing the capital base with reference to the deductions allowed under Chapter VI from the total income ? 2. Whether the Tribunal's view that for the purpose of the computation of capital base, the provisions of rule 4 of the Second Schedule would apply only to items of income which are wholly exempt under Chapter III and that those provisions would not apply to the deduction allowed under Chapter VI-A is sustainable in law ? 3. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that for the purpose of the computation of chargeable profits, the deduction under rule 1(viii) of the First Schedule should be made only with reference to gross dividends, but not the net dividends as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... um ascertained in accordance with rules 1, 2 and 3 as diminished by an amount which bears to that sum the same proportion as the amount of the aforesaid income, profits and gains bears to the total amount of its income, profits and gains, that the total income for purposes of rule 4 is the total amount of income computed in the manner laid down in the Act and after deducting the items listed in Chapter VI-A of the I.T. Act, and that the AAC had gone wrong in holding that in working out the capital base, rule 4 cannot be invoked in respect of deductions made under Chapter VI-A of the I.T. Act, 1961. The Tribunal, relying on its earlier decision in the case of Messrs. Bimetal Bearings Limited, in S.T.A. Nos. 6 and 7 of 1970-71 as also the dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation for the purpose of applying Chapter VI-A, the amount which is the subject-matter of relief is included in the total income and, therefore, it cannot be treated to be a case of profits and gains of a company not includible in the total income. In that case, this court referred to the decision of the Karnataka High Court in Second ITO v. Stumpp, Schuele and Somappa P. Ltd. [1977] 106 ITR 399, as supporting its view. Following the said decision of this court in the case of Bimetal Bearings Ltd. [1977] 110 ITR 131, questions Nos. 1 and 2 are answered in the affirmative and against the Revenue. Another point that was in controversy between the parties was whether the assessee was entitled to the deduction of gross or only net dividends i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income included, namely, income by way of dividends from a domestic company. This decision supports the stand taken by the assessee. The said decision of the Supreme Court has been neutralised and has been made ineffective by a retrospective amendment of s. 80M by the Finance (No. 2) Act, 1980, with effect from June 1, 1968. However, no corresponding amendment has been made in the Surtax Act until the Finance Act, 1981, with effect from April 1, 1981. Since the assessment years in this case are earlier to the said amendment to the Surtax Act with effect from April 1, 1981, the principle laid down by the Supreme Court in Cloth Traders (P.) Ltd. v. Addl. CIT [1979] 118 ITR 243 will apply here. The learned counsel for the assessee also relie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies Ltd. v. CIT [1979] 118 ITR 300 (HP) and CIT v. Patiala Flour Mills Co. (P.) Ltd. [1980] 123 ITR 273 (P H) as throwing light on the question referred in Mohan Meakin Breweries Ltd. v. CIT [1979] 118 ITR 300(HP), the Himachal Pradesh High Court held that the definition of " chargeable profits " provided in s. 2(5) of the Companies (Profits) Surtax Act, 1964, deals with the total income of an assessee computed under the I.T. Act, and the total income is further required to be adjusted in accordance with the provisions of the First Schedule by excluding " income by way of dividends " which expression refers to the gross income shown in the books of the assessee, and not the actual net income computed by the assessee, that if the Legislatu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 (viii) of the First Schedule by excluding " income by way of dividends " and, therefore, rule I (viii) of the First Schedule has to be interpreted so as to refer not to the quantum of dividend but to the category of dividend. Following the decision of the Supreme Court in Cloth Traders (P.) Ltd. v. Addl. CIT [1979] 118 ITR 243, we answer question No. 3 in the affirmative and against the Revenue. The Revenue will pay the costs of the assessee. Counsel's fee Rs. 500 (Rupees five hundred only) one set. The learned counsel for the Revenue makes an oral application for the grant of leave to appeal to the Supreme Court against the judgment just now pronounced. It is seen that leave to appeal to the Supreme Court has already been granted ..... X X X X Extracts X X X X X X X X Extracts X X X X
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