COMMISSIONER OF INCOME TAX Vs. SUNDARAM INDUSTRIES P LIMITED

JUDGEMENT

(1.) The revenue is in appeal against the judgment of a Division Bench of the High Court at Madras delivered upon a reference application by the revenue . The three questions that the High Court considered read as follows :

(2.) It is not in dispute that the first two questions are covered against the revenue by the judgment of this court in Second Income Tax Officer & Anr. V/s. Stumpp and Schedule & Somappa (P) Ltd., 1991 187 ITR 108. The question to consider, therefore, is the third question. The judgment of this court in Distributors (Baroda) (P) Ltd. V/s. Union of India & Ors., 1985 155 ITR 120 delivered in respect of a similar provision was considered by the Delhi High Court in the case of Commr. of Surtax V/s. Modi Industries Ltd.,1993 200 ITR 325. The question before the Delhi High Court was akin to question No. 3 before us. The Delhi High Court considered the judgment in Distributors (Baroda) (P) Ltd. and noted that following that judgment, several High Courts had taken the view that on a correct interpretation of rule 1(viii) of the First Schedule to the Companies (Profits) Surtax Act, 1964 , it was only the net dividend which was included in the total income and, therefore, it was this amount which was deductible in arriving at the figure of the chargeable profits. In our view, having regard to the language or the rule, this is the correct position and, accordingly, we affirm the view taken by the Delhi High Court in the case of Modi Industries Ltd. . The third question is, therefore, answered in the negative and in favour of the revenue.