MOHAN MEAKIN BREWERIES LIMITED Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) AT the instance of the assessee, who are Messrs. Mohan Meakin Breweries Ltd., Solan, the Income-tax Appellate Tribunal, Chandigarh, has referred to us the following question of law for opinion :

(2.) THE facts giving rise to this reference may now be stated. Messrs. Mohan Meakin Breweries Ltd. which is a public limited company carries on the business of manufacture and sale of beer, Indian made foreign liquors, malt, breakfast food and soft drinks, etc. THE assessee-company besides doing their business is also earning dividends from investments made in other Indian companies. For the assessment years 1968-69 and 1969-70, the gross income of the assessee from dividends from such Indian companies amounted to Rs. 34,212 and Rs. 29,441, respectively. THE assessee's claim was that the gross amount of dividends was to be excluded from the total income for the purpose of computation of the chargeable profits. But the ITO deducted the reduced amounts of Rs. 13,685 and Rs. 11,576 for these assessment years. According to the ITO, the amount of dividend liable to be reduced under Section 80M of the I.T. Act, 1961, would give the reduced figure, which only could be the income of the assessee from dividends and as such only the reduced amount could be adjusted while computing the chargeable profits under Rule 1(viii) of the First. Schedule to the C. (P.) S. T. Act, 1964. Being aggrieved by the decision of the ITO, the assessee filed an appeal before the AAC, who too agreed with the ITO and dismissed the appeal. THEreafter, the assessee came in further appeal before the Tribunal, but did not succeed. THE Tribunal referred to the language used in Rule 1 of the First Schedule " shall be excluded from such total income " and held that only that amount could be excluded which was included for the purpose of income-tax and that amount could only be the reduced figure after application of Sections 57 and 80M of the I.T. Act, 1961. THE assessee, however, contended that the words " income by way of dividends " used in Rule 1(viii) should be taken to mean the gross amount of dividends before deductions are made under Sections 57 and 80M of the I.T. Act. THE revenue on the other hand contended that income by way of dividends could only be the reduced income after making the adjustments under the aforesaid sections of the Act. Since the Tribunal did not agree with the contention made by the assessee, the latter asked for a reference of a question of law to this court and in this manner the matter is placed before us for opinion.

(3.) THE surtax is, of course, charged in respect of so much of the chargeable profits as exceed the statutory deduction at the rate specified in the Third Schedule : (Section 4).