1. This appeal which is filed by the assessee under the provisions of the Companies (Profits) Surtax Act, 1964 ('the Act'), relates to the assessment year 1977-78. The short ground raised by the assessee is that the interest charged under Sections 215 and 216 of the Income-tax Act, 1961, should be deducted while computing the chargeable profits under the Act.
2. Before the assessee, inter alia, claimed that the payment of Rs. 1,76,501 under Section 215 and Rs. 64,340 under Section 216 should be treated as a revenue outgoing and be deducted in computing the chargeable profits. In the alternative the said amount be treated on par with 'tax payable' by the assessee and be deducted in computing the chargeable profits. The ITO negatived these contentions on the ground that interest levied under the penal provisions of the 1961 Act could not be deducted as tax in computing the chargeable profits.
3. Being aggrieved, the assessee carried the matter in appeal before the Commissioner (Appeals) and contended that the term 'income-tax' includes interest and penalties leviable under the 1961 Act. It was then pointed out that in computing the chargeable profits, the total income has to be adjusted in accordance with Rule 1 of the First Schedule of the Act. Therefore, the payment of interest, as aforesaid should either be treated as an outgoing in computing the total income or in the alternative be treated as 'tax'. These contentions were rejected by the Commissioner (Appeals) by pointing out that interest paid under the 1961 Act cannot be equated to 'tax' and in this connection reliance was placed on the decisions in the cases of P.S.Subramanyan, ITO v. Simplex Mills Ltd.  48 ITR 980 (Bom.) and M.Chockalingam and M. Meyyappan v. CIT  48 ITR 34 (SC). The Commissioner (Appeals), accordingly, dismissed the appeal of the assessee. Being aggrieved, the assessee has come up in appeal before us.
4. Shri Chokshi, on behalf of the assessee, reiterated the twofold contentions which were placed before the authorities below, which we have set out earlier. He fairly stated that so far as inclusion of interest as in the definition of the expression 'tax', the decision of the Supreme Court in the case of Bhor Industries Ltd. v. CIT  42 ITR 57 was against him. He, however, rested the claim on the ground that the expression 'total income' for the purpose of levy of surtax should be widely construed inasmuch as the surtax was a levy on excess profits. The excess profits, therefore, has to be determined on commercial principles which would permit deduction of payment of penalty and penal interest also. In other words, even though penal interest and penalties were not deductible on the ground that they do not form the part of expression 'tax' of the same, the said payment should be considered while determining the chargeable profits on general commercial principles.
5. The learned departmental representative, Shri Deodhar, on the other hand relied on the orders of the authorities below.
6. We have carefully considered the rival submissions. In the case of Bhor Industries Ltd. (supra) it is laid down (in connection with the application of provisions of Section 23A of the Indian Income-tax Act, 1922) that in ascertaining the amount deemed to be distributed as dividend, no deduction could be made in respect of interest charged under Section 18A of the 1922 Act. Interest chargeable under Section 18A(8) was interest and not tax. Section 23A spoke of deduction only of income-tax and super-tax, no deduction could be made in respect of this interest. The provisions of Sections 215 and 216 are in pari materia with provisions of Sections 18A(6) and 18A(7) of the 1922 Act.
Therefore, the penal interest paid under the aforesaid provisions cannot be equated to 'tax' in the light of the above principle laid down by the Supreme Court. That apart the 1961 Act defines the expression 'tax' under Section 2(43) which only means income-tax chargeable under the provisions of the 1961 Act. The expression 'tax' used in Section 2(43), therefore, does not include the payment of interest or penalty. We are fortified, in our view, by the decision of the Karnataka High Court in the case of Soma Sundarams (P.) Ltd. v. CIT  116 1TR 620. In that case it was held, thus: Section 2(43) of the Income-tax Act, 1961 (as it stood at the relevant time), defined 'tax' as income-tax and super-tax chargeable under the provisions of that Act. Therefore, what is levied under the charging provisions of that Act, i.e., Section 4 thereof alone can be called 'income-tax'. Interest, penalties and fines, which are payable under the other provisions of that Act, cannot be termed as 'income-tax'. They are imposed in addition to income-tax for the purpose of enforcing the levy of income-tax. Therefore, the penalty levied under Section 271(1)(a) of the Income-tax Act, 1961, is not deductible under Rule 2(i) of the First Schedule to the Super Profits Tax Act, 1963, when computing the chargeable profits under the Super Profits Tax Act.
In the light of the above decision, therefore, the contention raised by Shri Chokshi that penal interest paid by the assessee should be treated as 'tax' must fail.
7. Now we turn to the other contention raised by Shri Chokshi to the effect that in computing the 'chargeable profits' the penal interest paid as aforesaid should be allowed as a deduction on general commercial principles. Now Section 4 of the Act levies a charge on the chargeable profits of the previous year, which exceeds statutory deduction, at the rate or rates specified in the Third Schedule. The expression 'chargeable profits' is defined in Section 2(5) of the Act which means total income of an assessee computed under the 1961 Act for any previous year or years, as the case may be, and adjusted in accordance with the provisions of the First Schedule. Therefore, in computing the chargeable profits, total income of the assessee for the relevant previous year forms a base. From such total income adjustments as required in the First Schedule are required to be made. These adjustments do not provide for deduction of penal interest or penalty.
We cannot stretch the meaning of the definition of the expression 'chargeable profits' beyond what is defined under the Act. That apart, Section 2(5) of the Act states that all words and expressions used in the Act but not defined and defined in the 1961 Act shall have the same meaning respectively assigned to them in that Act. Therefore, meaning of the expression of total income has to be adopted in accordance with the provisions of Section 2(45). The total income, therefore, has to be computed in accordance with the provisions of the 1961 Act which does not provide for any deduction of penal interest or penalty. It is neither adjustment contemplated under the First Schedule of the Act nor the definition of the total income under the 1961 Act provides for deduction of penal interest. It is not possible, therefore, to accept the proposition canvassed by Shri Chokshi that the said payments be allowed in computing the chargeable profits on general commercial principles. In other words, when there are specific provisions set out in the Act it is not possible to travel beyond what is set out in the relevant provisions. Therefore, the other contention made by Shri Chokshi also stands rejected.