9911796707
TMI Blog1978 (6) TMI 53X X X X Extracts X X X X X X X X Extracts X X X X ..... relevant assessment year held certain shares in some Indian companies. It transpired that during that assessment year, the assessee did not derive any income by way of dividend in respect of some of those shares, the cost of which to the assessee was Rs. 26,33,201. In the course of the assessment proceedings under the Act, the assessee claimed that while determining its capital base for purposes of computing the statutory deduction to which it was entitled under the Act, the aforesaid cost of the shares which had not yielded dividend, viz., Rs. 26,33,201, should not be deducted under rule 2 of the Second Schedule to the Act. In other words, the contention of the assessee was that the said, amount should also be treated as part of the cap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law in holding that the sum of Rs. 26,33,201 representing the investment in shares from which the assessee received no dividends, should not be excluded from the capital base under rule 2 of the Second Schedule of the Companies (Profits) Surtax Act, 1964 ? " Section 4 of the Act provides that subject to the provisions contained in this Act, there shall be charged on every company for every assessment year commencing on and from the first day of April, 1964, a tax (in the Act referred to as the surtax) in respect of so much of its chargeable profits of the previous year or previous years, as the case may be, as exceed the statutory deduction, at the rate or rates specified in the Third Schedule. The expression " chargeable profits " is d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urposes of surtax. The relevant part of rule 2 of the Second Schedule which arises for consideration in this case reads as follows : " Where a company owns any assets the income from which in accordance with clause (iii) or clause (vi) or clause (viii) of rule 1 of the First Schedule is required to be excluded from its total income in computing its chargeable profits, the amount of its capital as computed under rule 1 of this Schedule shall be diminished by the cost to it of the said assets is on the first day of the previous year relevant to the assessment year in so far as such cost exceeds the aggregate of--...... " The question that is referred to us is not happily worded. The real question which arises for consideration in this cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is required to be excluded from its total income in computing its chargeable profits, the amount of its capital as computed under rule 1 shall be diminished from the cost to the assessee of the said assets. It does not say that the application of rule 2 is dependent upon the circumstance that the assets in question in fact earned income by way of dividend during the relevant year. The word " income " in the words " any assets the income from which " in rule 2 should be read as meaning " income, if any ", in the context in which it appears. If there is an asset which answers the description or is of the category described in clause (viii) of rule 1 of the First Schedule, the cost of the said asset to the assessee should be deducted from the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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