SUHAS CHANDRA SEN, J. - (1.) THE Tribunal has referred the following two questions of law of this Court under s. 256(1) of the IT Act, 1961, read with s. 18 of the Companies (Profits) Surtax Act, 1964. '(1) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that for the purpose of computation of chargeable profits under the Companies (Profits) Surtax Act, 1964 the amount of gross dividend should be excluded as per provisions of r. 1(viii) of the 1st Schedule instead of the net amount of dividend (2) Whether on the facts and in the circumstances of the case, the Tribunal was justified in holding that in computing the chargeable profits the loss on account should not be excluded and further that the gross dividend of Rs. 74,750 should be excluded from the total income in computing the chargeable profits under Companies (Profits) Surtax Act, 1964 ?'
(2.) THE assessment years involved in this reference are the asst. yrs. 1973 -74 and 1974 -75, for which the relevant period of account is the year ended on 31st March, 1973 and 31st March 1974, respectively. So far as the question No. 1, relating to asst. yr. 1973 -74 is concerned, in view of the judgment given by this Court on 1st August, 1989 in IT Ref. No. 4 of 1981 (CIT vs . Hindusthan Gum and Chemicals Ltd. : [1990]182ITR396(Cal) this question must be answered in the negative and against the assessee.
(3.) SO far as the second question is concerned, finding of facts as recorded by the Tribunal are as under : The assessee claimed deduction of Rs. 23,913 as per provisions of r. 1(viii) of the 1st Schedule. However, as per IT records for this year income by way of dividend was determined at a loss figure of Rs. 2,89,750. The loss figure was arrived at after deducting expenses incurred by the assessee for earning dividend income, from the gross dividend received by the assessee at Rs. 74,750. The ITO observed that as per IT assessment order the assessee was entitled to any relief in respect of income by way of dividend as per provisions of r. 1(viii) of the Companies (Profits) Surtax Act, 1964. Assessees claim of deduction of dividend income earned during the year was, therefore, rejected by the ITO. On the other hand, income by way of dividend as per IT assessment order stood at a loss figure of Rs. 2,89,750. It was excluded by the ITO while computing the chargeable profits, under the Companies (Profits) Surtax Act, 1964. He therefore, held that the loss determined under the head Income from dividend would have to be excluded. The assessee moved the CIT(A) contending that the chargeable profit was to be computed as per the provisions of the Surtax Act and no adjustment other than which was admissible by the provisions of the 1st Schedule could be made and that the Explanation as per r. 1(viii) should be gross dividend of Rs. 74,750 as against adding back of the negative figure determined in the assessment. The CIT(A) was convinced with regard to the above contention and allowed the appeals.;