Satish Chandra, C.J. - (1.) THE Upper Doab Sugar Mills Ltd., the assessee, was liable under the Companies (Profits) Surtax Act, 1964. For the assessment year 1967-68, the I.TO proceeded to compute the chargeable profits of the assessee by taking the total income as assessed under the I.T. Act.
(2.) IT appears that in the assessment under the I.T. Act the amounts claimed as deductible allowances on account of entertainment expenses, advertisement and commission had been disallowed. The total income assessed included the claimed expenses under these three heads. The ITO, while computing the chargeable profits, did not make any additions under Rule 3(ii) of the First Schedule to the Act. The assessee felt aggrieved, and went up in appeal. It claimed relief of Rs. 8,505 on account of entertainment expenses, Rs. 3,288 on account of advertisement, and Rs. 12,000 on account of commission. It was urged on behalf of the assessee that since these amounts stand included in the computation of chargeable profits without previous approval of the IAC, they should be deducted. The AAC repelled the submission. He held that since the expenditure under these three heads was disallowed under the I.T. Act, there was no question of the applicability of Rule 3. Rule 3 applies only if an expenditure had earlier been allowed under the I.T. Act while computing the total income.
(3.) THE assessee went up to the Tribunal. In para. 6 of the Tribunal's order, the contention on behalf of the assessee has been put as follows: "And lastly the assessee asserts that the two amounts of Rs. 8,505 out of entertainment expenses and Rs. 12,000 out of commission expenses which were disallowed at the income-tax assessment stage should have been added in the aggregate of 'chargeable profits '." In our opinion, the argument, as put, makes no sense because if these amounts are added, the liability to surtax would increase. We feel that the argument was that these amounts should not have been added.;