Sankar Prasad Mitra, CJ. - (1.) This is a reference under Section 256(1) of the I.T. Act, 1961. Before we go into the facts of the case it would be appropriate to set out a few provisions of the Super Profits Tax Act, 1963, and a few provisions of the First and Second Schedules to the Act. Section 2(5) defines " chargeable profits ". It means the total income of an assessee computed under the I.T. Act, 1961, for any previous year or years, as the case may be, and adjusted in accordance with the provisions of the First Schedule.
(2.) Section 2(9) defines "standard deduction". It means, inter alia, an amount equal to 6% of the capital of the company as computed in accordance with the provisions of the Second Schedule, or an amount of fifty thousand rupees, whichever is greater.
(3.) Section 4 is the charging section. It says : "Subject to the provisions contained in this Act, there shall be charged on every company for every assessment year commencing on and from the 1st day of April, 1963, a tax (in this Act referred to as the super profits tax) in respect of so much of its chargeable profits of the previous year or previous years, as the case may be, as exceed the standard deduction at the rate or rates specified in the Third Schedule,";