Sabyasachi Mukharji, J. - (1.) In this reference under Section 226(1) of the I.T. Act, 1961, the following question has been referred to this court : "Whether, on the facts and in the circumstances of the case, the computation of super-tax made by the Income-tax Officer is, in law, correct ?"
(2.) The ITO computed the total income at Rs. 2,18,81,633, in accordance with the provisions of the First Schedule in Part 2, Para. D of the Finance Act, 1964. The ITO calculated the super-tax chargeable from the company on the whole of the total income at 55%. In accordance with prov. (iii)(B), the ITO allowed rebate of 26% on Rs. 11,06,977 being that part of the total income as was attributable to the manufacture of articles specified in the list in Part IV of the Schedule and at 20% on the balance of the total income amounting to Rs. 2,07,62,199. Thus, against the corporation tax of Rs. 1,20,29,946.90 calculated at the rate of 55% of the total income, a rebate in corporation tax was calculated at Rs. 44,40,253.62. Since the company had issued bonus shares of Rs. 2,10,72,910 reduction at the rate of 121/2% on account of such bonus shares was made. This reduction amounted to Rs. 26,34,114. The net rebate thus was worked out to 46.741% of the total income. Under the provisions of Section 84 of the I.T. Act, 1961, the ITO had allowed rebate of Rs. 21,15,879 at 46.741% while the rebate under Section 99(1)(iv) on inter-corporate dividend of Rs. 18,25,920 was allowed at 46.741%. The rebate on the above two items had worked out to Rs. 18,42,436.26. The net super-tax payable by the company was determined at Rs. 83,79,470.72. It may be proper for the purpose of better understanding of this position to set out the actual working out of these figures by the ITO in the computation made by him. JUDGEMENT_829_ITR129_1981Html1.htm
(3.) The Addl. Commissioner called for and examined the records of the assessee-company. He was of the view that the order of the ITO in so far as it made a computation of rebate on super-tax was erroneous and prejudicial to the interests of the revenue. According to the Addl. Commissioner, the correct computation was that having determined the super-tax payable by the assessee-company at 55% on the total income thereof at Rs. 1,20,28,046.80 the ITO could have granted therefrom relief under Section 101 in respect of new industrial undertakings on the income of Rs. 21,15,879 and rebate under Section 99(1)(iv) on inter-corporate dividends of Rs. 18,25,920. Thus, on these two items totalling Rs. 39,41,799 rebate at 55% amounting to Rs. 21,67,989.45 should have been allowed bringing the super-tax payable to a figure of Rs. 98,60,057.35. After having done so, according to the Additional Commissioner, the ITO should have allowed rebate at 26% on income from priority industries amounting to Rs. 11,06,977 and at the rate of 20% on the balance of Rs. 1,68,21,400. These rebates worked out to Rs. 36,52,094.02. The reduction in rebate on account of bonus shares of Rs. 2,10,72,910 at 121/2% was worked out at Rs. 26,34,114. Thus, the figure of net rebate was brought out at Rs. 10,17,980.02. According to the computation of the Addl. Commissioner, the corporation tax chargeable was Rs. 88,42,077.33 as against Rs. 83,79,470.72 computed by the ITO. The Addl. Commissioner held that the order of the ITO was to that extent erroneous and prejudicial to the interests of the revenue. He, therefore, set aside the assessment with a direction to the ITO to make a fresh reassessment according to law and facts after giving adequate and reasonable opportunity to the assessee. The order of the Addl. Commissioner contained a computation which it would be better to set out. JUDGEMENT_829_ITR129_1981Html1.htm;