- (1.) A common question arises in this batch of appeals. For the sake of convenience, we may refer to the question in Civilno. 455 of 1987 directed against a full bench judgment of the Kerala High court A. V. Thomas and Co. Ltd. v. Commissioner of Income Tax. The following question was stated by the Income Tax Appellate tribunal under Section 256 (1 of the Income Tax Act for the consideration of the Kerala High court: "(1 Whether Rs. 76,777. 00 being the surtax liability is to be allowed as a deduction in computing the total income of the assessee for the Assessment Year 1976-77 -the claim for the said deduction was disallowed by the Income Tax Officer on the basis of and with reference to sub-clause (ii) of clause (a) of Section 40 which read thus at the relevant time: "40.Notwithstanding anything to the contrary in S. 30 to 39, the following amounts shall not be deducted in computing the income chargeable under the head 'profits and gains of business or profession', (a) in the case of any assessee- 582 a) (ii) any sum paid on account of any rate or tax levied on the profits or gains of any business or profession or assessed at a proportion of, or otherwise on the basis of, any such profits or gains. "
(2.) On appeal, the Appellate Assistant Commissioner allowed the assessee's claim but on further appeal by the Revenue, the tribunal upheld the Revenue's contention and disallowed the claim for deduction on the basis of Section 40 (a) (ii). The High court has affirmed the view taken by the tribunal. The only question before us is whether the tax levied under the Companies Profits (Surtax) Act, 1964 is "a tax levied on the profits or gains of any business or profession or assessed at a proportion of or otherwise on the basis of any such profits or gains", as contemplated by the said sub-clause.
(3.) Section 40 opens with a non obstante clause "notwithstanding anything to the contrary in S. 30 to 39", which means that even if any amount is entitled to deduction under any of the provisions contained in S. 30 to 39, it will be disallowed if it falls inter alia within sub-clause (ii) of clause (a) of Section 40. The question, therefore, is whether the tax levied under the Companies Profits (Surtax) Act, 1964 falls within the mischief of the said sub- clause. We think it does.;