1987 (7) TMI 141

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..... he exclusion of this amount was under rule 2 of said Schedule of the said Act. The said rule is as follows : "2. 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 as on the first day of the previous year relevant to the assessment year in so far as such cost exceeds the aggregate of ......." The assessee filed appeal before the Commissioner of Surtax (Appeals). The contention of the assessee before the Commissioner of Surtax (Appea .....

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..... nd Schedule under which the Surtax Officer has to make a deduction. The words 'income from which in accordance with clause (viii) of rule 1 of the First Schedule is required to be excluded from its total income in computing its chargeable profits" appearing in rule 2 of the Second Schedule of the Act are in our view, only descriptive of the assets to which the provision applies and they have no bearing on the question whether the assets in question had, during the relevant period, actually earned any income or not. We are of the opinion that if there is an asset which answers to the description, or is of the category described in clause (viii) of rule 1 of the First Schedule, then the cost of the said asset to the assessee should be deducte .....

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..... t is evident that it has no relation to the quantum of income that particular asset has fetched in a year. The diminution of the value of the asset to be caused under rule 2 of the Second Schedule is not linked and has no bearing to the quantum of income to be excluded under clause (viii) of rule 1 of the First Schedule. In other words, the exclusion of the value of the asset under rule 2 of the Second Schedule would remain constant, whether the income from that asset [to be excluded under clause (viii) of rule 1 of the First Schedule] is either one rupee or one lakh, or nil. Following the decision of the Karnataka High Court referred to above, we hold that the cost of the shares of Indian companies held by the assessee should be excluded f .....

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