Decided on November 03,1982



T.D. Sugla, President - (1.) THIS appeal by the assessee, a company, relating to its surtax assessment for the assessment year 1977-78, involves a short and interesting question. Briefly stated, the relevant facts are that the assessee's liability to surcharge on income-tax for the year worked out to Rs. 23,729. However, having made a deposit of Rs. 22,100 under the Companies Deposits (Surcharge of Income-tax) Scheme, 1976 ('the Scheme'), its liability in this regard was reduced to Rs. 1,629. THIS amount was actually paid. The assessee claimed that the gross amount of surcharge payable, i.e., Rs. 23,729, as distinct from the net amount actually paid, i.e., Rs. 1,629, should be deducted under Section 2(5), read with Rule 2(i) of the First Schedule, of the Companies (Profits) Surtax Act, 1964 ('the Act'), for the purpose of computing the chargeable profits. The claim was that the deposit of Rs. 22,100 under the aforesaid scheme was nothing but a payment of surcharge as envisaged under Section 2(8) of the Finance Act, 1976. Both the STO and the Commissioner (Appeals) rejected the claim holding that for the purpose of computing the chargeable profits the income-tax including surcharge to be deducted is the net amount of income-tax determined as payable.
(2.) The appeal came up before a Division Bench of the Tribunal. The orders passed by different Benches of the Tribunal were produced by the parties to show that different Benches had taken conflicting views on the issue. Reference was made to the President for constituting a Special Bench. The proposal was accepted and hence this appeal before the Special Bench. Arguments were advanced at great length. Reference was made to the relevant provisions of the Finance Acts, 1976 and 1977, Rule 2(i) of the First Schedule to the Act, Notes on Clauses [ [1976] 102 ITR (St.) 162 and [1976] 102 ITR (St.) 181], the decisions of the Supreme Court in the cases of CIT v. S.A.S. Marimuthu Nadar [1962] 44 ITR 1, R.B. Jodha Mal Kuthiala v. CIT [1971] 82 ITR 570, CIT v. TV. Sundaram lyengar & Sons (P.) Ltd. [1975] 101 ITR 764 and Smt. Tamlata Shyam v. CIT [1977] 108 ITR 345, the decision of the Gujarat High Court in the case of Addl. CIT v. Rustam Jehangir Vakil Mills Ltd. [1976] 103 ITR 298 and the Budget Speech of the Hon'ble Finance Minister for the financial year 1976-77, relevant extract available at page 1 of the paper book, etc., in support of the rival contentions. The assessee's counsel also brought in, the concept of 'equity' and urged that an interpretation contrary to what he was suggesting would cause hardship and injustice and that assuming two interpretations were reasonably possible, one in favour of the assessee will have to be accepted.
(3.) WE have considered the rival contentions carefully and have gone through all that have been referred to and or relied upon before us during the course of the hearing. There being no direct authority on the proposition either way, we consider it desirable to examine the provisions on first principle, in the first instance. Section 2(5) of the Act defines 'chargeable profits' as under : Chargeable profits' means the total income of an assessee computed under the In come-tax Act, 1961 (43 of 1961), for any previous year or years, as the case may be, and adjusted in accordance with the provisions of the First Schedule. Rule 2(i) of the First Schedule provides the manner for computation of chargeable profits. Rule 2(i) of the Schedule with which we are concerned in this appeal provides for- 2. The balance of the total income arrived at after making the exclusions mentioned in Rule 1 shall be reduced by- (i) the amount of income-tax payable by the company in respect of its total income under the provisions of the Income-tax Act after making allowance for any relief, rebate or deduction in respect of income-tax to which the company may be entitled under the provisions of the said Act or the annual Finance Act, and after excluding from such amount- It being a common ground that income-tax includes surcharge on income-tax, we have no difficulty in holding that the total income requires to be reduced by the amount of income-tax payable by the company and that the amount of income-tax payable would be the amount of income-tax which remains payable after taking into account all allowances, relief, rebate or deduction in respect of income-tax.;

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