- (1.) The Companies (Profits) Surtax Act imposes an additional tax, apart from income tax, on the income of a company. It is a tax on so much of the "chargeable profits" of a company of the previous year as exceeds the statutory deduction at the rate specified in the Act. "chargeable profits" has been defined by Ss. (5 of Section 2 to mean the total income of an assessee computed under the Income Tax Act and adjusted in accordance with the provisions of the First Schedule. In other words, the Income Tax Act imposes a charge on the total income of an assessee. The Companies (Profits) Surtax Act provides for levy of additional tax on the total income as computed under the Income Tax Act, after certain adjustments by excluding certain types of income and some deductions from the total income as computed under the Income Tax Act. One of the deductions which has to be made for computing chargeable profits for the purpose of levy of surtax is the amount of income tax, if any, payable by a company under Section 104 of the Income Tax Act.
(2.) The assessee-Company in this case was assessed to income tax for the Assessment Year 1964-65 on 29/3/1965. The tax payable was determined to be Rs. 1,68,000. 00. This was followed by an assessment under the Companies (Profits) Surtax Act on 30/3/1965. Later on, the Income Tax Officer thought that he had wrongly held the assessee-Company to be a widely-held company and reopened the income tax assessment under Section 147. Sometime in September 1968 an order was passed holding the assessee-Company to be a closely-held Company as a result of which the burden of income tax on the Company became heavier.
(3.) Consequently, the Income Tax Officer rectified the assessment order passed under the Surtax Act on 16/9/1968. The additional amount of income tax determined as payable under the order under Section 147 was allowed as deduction from the chargeable profits under the Surtax Act. As a result of the order of rectification passed under Section 13, the surtax liability of the Company stood reduced. Thereafter, the Appellate Assistant Commissioner, on appeal by the assessee, cancelled the order under Section 14 7/11/1970. In March 1971, the Income Tax Officer gave effect to the Appellate Assistant Commissioner's order and recomputed the tax liability under the Income Tax Act. The Income Tax Officer once again took resort to Section 13 on 1/04/1971 and rectified the surtax assessment by withdrawing the deduction of the additional amount of tax which had been held payable under the order passed under Section 147 of the Income Tax Act. The second order of rectification was passed on 21/4/1971. Both the Appellate Assistant Commissioner and the tribunal held that the Income Tax Officer's order was logical and justified in the facts and circumstances of this case.;