COMMISSIONER OF INCOME TAX Vs. ALEMBIC CHEMICAL WORKS COMPANY LIMITED

JUDGEMENT

(1.) IN this case, at the instance of the Revenue, the following question has been referred to us for our opinion :

(2.) THE CIT took up the matter in suo motu revision under S. 16 of the Act. The provisions of S. 16 are similar to the provisions of S. 263(1) of the IT Act, 1961. In the view of the CIT, deductions made under the various sections of Chap. VI A of the IT Act were made in arriving at the total income and since the amounts had been actually deducted from the total income, it could not be said that the said deductions were included in the total income. According to the view taken by the CIT, on the facts and circumstances of the case, r. 4 of the Second Schedule was applicable and he directed the ITO to re compute the capital employed by the assessee after deducting from the capital computed a figure in the same proportion as the relief allowed under Chap. VI A bore to what was described as the gross total income, that is, income worked out for income tax purposes before considering the relief under Chap. VI A of the IT Act. After making the necessary calculation, the CIT directed that the capital computed should be reduced by Rs. 17,15,921 and be reduced to Rs. 3,60,81,886 instead of to Rs. 3,77,97,807, which was the amount of capital computed by the ITO.

(3.) THE Tribunal held that there was a difference in the headings of Chaps. III and VI A of the IT Act and they made a distinction between certain types of income brought altogether out of the scope of taxable income and which were not includible at all in the total income as computed under the IT Act and deductions provided for under Chap. VI A. The Tribunal held that there was no reason why they should differ from the decision of the Bombay Tribunal and following the decision of the Bombay Bench of the Tribunal, the Tribunal set aside the decisions of the CIT for the two years under reference and allowed the appeals. Thereafter, at the instance of the Revenue, the question hereinabove set out has been referred to is for our opinion. In order to appreciate the controversy in this case, it is necessary to refer to some of the provisions of the C.(P.) ST Act, 1964. This Act came into force w.e.f. 1st of April, 1964, and under S. 4, which is the charging section : 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 April, 1964, a tax (in this Act referred to as the surtax) in respect of so much of its chargeable profits of the previous year or previous years, as the case may be, as exceed the statutory deduction, at the rate or rates specified in the Third Schedule."