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TMI Blog1982 (7) TMI 115X X X X Extracts X X X X X X X X Extracts X X X X ..... l, is that the Commissioner (Appeals) was not justified in holding that only the net amount of dividend was deductible and not the gross amount of dividend, by applying the provisions of section 80AA of the Income-tax Act, 1961 ('the Act'), while computing the appellant's chargeable profits, as per the Companies (Profits) Surtax Act, 1964 ('the Surtax Act'). The facts relating to the claim of the appellant in each of the two years are the following: In computing the chargeable profits for the first year, the appellant claimed that the gross amount of dividends of Rs. 3,69,620 should be deducted under rule 1 of the First Schedule of the Surtax Act. Similarly, in the next year, the assessee's claim was for deduction of gross dividends of Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e net dividend income would have to be taken. He, therefore, confirmed the orders of the STO in both the years on this point. 5. The appellant's learned counsel, Shri Gautam B. Doshi, submitted that section 80AA, relied on by the Commissioner (Appeals), dealt with the provisions of the Act only and was not applicable to the assessments under the Surtax Act. He pointed out that in order to make good this omission in the Surtax Act, an Explanation was added to rule 1 of the First Schedule to the Surtax Act by the Finance Act, 1981, only with effect from 1-4-1981. The learned counsel submitted that if the Parliament, while introducing this Explanation, did not make it retrospective in operation as it had done while inserting section 80AA by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in CIT v. Jupiter General Insurance Co. [1975] 101 ITR 370. This decision of the Bombay High Court has been followed by the Himachal Pradesh High Court in Mohan Meakin Breweries Ltd. v. CIT [1979] 118 ITR 300. The following decisions have also taken a similar view in favour of the assessee---CIT v. Madras Motors General Insurance Co. Ltd. [1979] 99 ITR 243 (Mad.), CIT v. Emcete Sons (P.) Ltd. [1977] 109 ITR 491 (Mad.) and A. V. Thomas Co. v. CIT [1977] 110 ITR 515 (Ker.). In the case of Patiala Flour Mills, their Lordships of the Punjab Haryana High Court applied the decision of the Supreme Court in the case of Cloth Traders and held that the definition of 'chargeable profits', provided in section 2(5) of the Surtax Act, deals with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irst Schedule to the Surtax Act was inserted by the Finance Act, 1981, with effect from 1-4-1981, and reads as follows : "Explanation : Notwithstanding anything contained in any clause of this rule, the amount of any income or profits and gains which is required to be excluded from the total income under that clause shall be only the amount of such income or profits and gains as computed in accordance with the provisions of the Income-tax Act (except Chapter VIA thereof), and in a case where any deduction is required to be allowed in respect of any such income or profits and gains under the said Chapter VIA, the amount of such income or profits and gains computed as aforesaid as reduced by the amount of such deduction." There is no disp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estic companies. 27.4 The Finance Act has, accordingly, inserted a new Explanation in rule 1 of the First Schedule to the Companies (Profits) Surtax Act so as to provide that in computing the chargeable profits, the amount of income or profits and gains referred to in rule 1 and specified in paragraph 27.1 above which stands included in the total income alone would be deducted from the chargeable profits. In other words, the amount of dividends and royalties computed for the purposes of the Income-tax Act after allowing all deductions (including deductions under sections 80M and 80MM) will only be excluded for the purposes of surtax. 27.5 This provision has come into force from 1st April, 1981, and will accordingly apply in relation to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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