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TMI Blog1982 (12) TMI 35X X X X Extracts X X X X X X X X Extracts X X X X ..... the amount of the aforesaid income, profits and gains bears to the total amount of its income, profits and gains. " The question is whether the words " a part of the income, profits and gains of a company is not includible in its total income as computed under the Income-tax Act " refer to and take in the deduction granted under s. 80J of the I.T. Act. The C. (P.) S.T. Act, 1964, is enacted to impose a special tax on the profits of certain companies. " Chargeable profits" is defined in cl. (5) of s. 2 to mean the total income of an assessee computed under the I.T. Act, 1961, for any previous year or years, as the case may be, and adjusted in accordance with the provisions of Sch. I. " Statutory deduction " is defined in cl. (8) of s. 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd gains. The idea behind r. 4 obviously is that where a particular item of income, profits and gains of a company is not includible in the total income as computed under the I.T. Act, the capital asset which produces that income, profits or gains, should equally be excluded from out of the capital while determining the capital of the assessee for the purpose of this Act. Now the question is whether the words "a part of the income, profits and gains of a company is not includible in its total income as computed under the Income-tax Act " refer only to those incomes which are referred to in s. 10 of the Act or whether they also refer to deductions mentioned in Chap. VI-A of the I.T. Act. To determine this question, it is necessary to look to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent. per annum on the capital employed in the industrial undertaking or ship or the business of a hotel, as the case may be. It is significant to note that while s. 10 specifies incomes which are not to be included in the total income, the several provisions in Chap. VI-A are called " deductions ". In other words, these provisions provide for deductions to be made out of the total income. If we look at the language of rule 4 in Sch. II to the Surtax Act, keeping the above distinction in mind, it would be clear beyond any shadow of doubt that the words " not includible " in r. 4 clearly refer only to s. 10, but not to " deductions" mentioned in Chap. VI-A. This is the view taken unanimously by several High Courts in this country, namely, S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e total income of the assessee, it is only the portion of the income which can be Processed under r. 4 for determining the proportionate capital attributable to that part of the income, profits or gains which is not includible in the total income for the purposes of the I.T. Act ...... Therefore, ultimately, so far as r. 4 is concerned, it is only the income of the assessee falling within s. 10 and that part of the income which is outside the sweep of ss. 4 and 5 of the I.T. Act, that can be said to be income not includible in the total income as computed under the provisions of the I.T. Act. Barring these two categories, one dealing with the sweep of ss. 4 and 5 of the I.T. Act, and the other covered by the different clauses of s. 10, all ..... X X X X Extracts X X X X X X X X Extracts X X X X
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