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indra Singh and Sons Private Ltd. Vs. Commissioner of Income-tax - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtKolkata High Court
Decided On
Case NumberIncome-tax Reference No. 87 of 1977
Judge
Reported in[1979]119ITR80(Cal)
ActsCompanies (Profits) Surtax Act, 1964 - Section 13 - Schedule - Rule 4; ;Income Tax Act, 1961 - Section 80I
Appellantindra Singh and Sons Private Ltd.
RespondentCommissioner of Income-tax
Appellant AdvocateS.R.Banerjee, ;Souren Mukherjee and ;D.C. Nandi, Advs.
Respondent AdvocateAjit Sengupta and ;Prabir Majumdar, Advs.
Cases ReferredT.S. Balaram v. Volkart Bros.
Excerpt:
- .....of surtax under the c. (p.) s.t. act, 1964. in the assessment proceedings, the itodetermined the total income of the assessee for the relevant previous year at rs. 27,65,443 after allowing a deduction of rs, 1,59,240 under section 80-i of the i.t. act, 1961. the said sum of rs. 1,59,240 represented 8% of the assessee's profits attributable to its priority industry.3. in the assessment of the assessee for the same assessment year under the c. (p.) s.t. act, 1964, the ito computed its capital in accordance with the second schedule to the act for the purpose of determining the statutory deduction to be allowed from the chargeable profits. rule 4 of the second schedule to the said act requires that where a part of the income, profits and gains of a company is not includible in the total.....
Judgment:

Deb, J.

1. This reference under Section 256(1) of the I.T. Act, 1961, read with Section 13 of the Companies (Profits) Surtax Act, 1964, relates to the assessment year 1970-71.

2. The assessee is company to which Section 80-I of the 1961 Act applies. The chargeable profits of the assessee were subject to the levy of surtax under the C. (P.) S.T. Act, 1964. In the assessment proceedings, the ITOdetermined the total income of the assessee for the relevant previous year at Rs. 27,65,443 after allowing a deduction of Rs, 1,59,240 under Section 80-I of the I.T. Act, 1961. The said sum of Rs. 1,59,240 represented 8% of the assessee's profits attributable to its priority industry.

3. In the assessment of the assessee for the same assessment year under the C. (P.) S.T. Act, 1964, the ITO computed its capital in accordance with the Second Schedule to the Act for the purpose of determining the statutory deduction to be allowed from the chargeable profits. Rule 4 of the Second Schedule to the said Act requires that where a part of the income, profits and gains of a company is not includible in the total income as computed under the I.T. Act, its capital shall be the sum ascertained in accordance with Rules 1, 2 and 3 of the said Schedule as diminished by an amount which bears to that sum the same proportion as the amount of the aforesaid income, profits and gains bears to the total amount of its income, profits and gains.

4. But in computing the capital of the company for the purpose of determining the statutory deduction, the ITO did not make any appropriate deductions under the aforesaid Rule 4 with respect to the aforesaid sum of Rs. 1,59,240 which was allowed as a deduction in the income-tax assessment under Section 80-I of the I.T. Act, 1961, in computing the total income of the assessee. Later on, the successor-ITO purported to rectify the surtax assessment under Section 13 of that Act. He computed the capital of the assessee by making a proportionate reduction therefrom under Rule 4 of the Second Schedule with reference to the sum of Rs. 1,59,240 representing the relief granted in this income-tax assessment under Section 80-I of the I.T. Act, 1961. He did so in the view that not making such proportionate reduction of capital under Rule 4 of the Second Schedule to the Surtax Act in the assessment was a mistake apparent from the record, which could be rectified under Section 13 of the said Act, This resulted in enhancement of the net chargeable profits and of the surtax payable by the assessee.

5. The assessee filed an appeal. The AAC set aside the order of the ITO on the ground that the mistake was neither patent nor apparent from the record by relying on the decision of the Supreme Court in the case of T.S. Balaram v. Volkart Bros. : [1971]82ITR50(SC) .

6. The department then filed an appeal. The Tribunal held that the mistake was apparent and patent and, therefore allowed the appeal. The Tribunal also held that the proportion of the profits and gains attributable to priority industry which was deductible under Section 80-I of the I.T. Act, 1961, in the computation of the total income in the income-tax assessment was not ' includible' in the total income so as to attract the said rule and,therefore, the capital of the assessee was liable to be proportionately diminished under Rule 4 of the Second Schedule to the C. (P.) S.T. Act, 1964.

7. Thereafter the Tribunal, at the instance of the assessee, referred the following questions to this court I

' (1) Whether, on the facts and in the circumstances of the case and on a proper interpretation of rule 4 of the Second Schedule to the Companies (Profits) Surtax Act, 1964, the Tribunal was correct in holding that the portion of the profits and gains attributable to priority industry which was deducted under Section 80-I of the Income-tax Act, 1961, in the computation of the total income of the assessee in the income-tax assessment was not 'includible in its total income ' so as to attract the said rule 4 and, therefore, the capital of the assessee was liable to be proportionately diminished under that rule ?

(2) Whether, on the facts and in the circumstances of the case, the Tribunal was correct in holding that the Income-tax Officer not making proportionate diminution of capital under the aforesaid rule 4 in the surtax assessment with reference to the portion of the profits of the priority industry that was deducted under Section 80-I of the Income-tax Act, 1961, in the computation of total income in the income-tax assessment was a mistake apparent from the record that could be later rectified by the Income-tax Officer under Section 13 of the Companies (Profits) Surtax Act, 1964 '

8. Mr. S. R. Banerjee, learned counsel for the assessee, by placing strong reliance on the decision of the Madras High Court in the case of Addl. CIT v. Bimetal Bearings Ltd. : [1977]110ITR131(Mad) argues that Rule 4 of the Second Schedule to the C. (P.) S.T. Act, 1964, does not apply in the case of a priority industry. But it is not necessary for us to express any opinion on it, for, in our opinion, question No, 1 is a pure academic question in view of our answer to question No. 2 as hereinafter stated.

9. Mr. Ajit Sengupta, learned counsel for the revenue, argues that the view taken by the Tribunal is the only view that can be taken on the interpretation of Rule 4 to the Second Schedule of the C. (P.) S.T. Act, 1964, and there cannot be two conceivable views on it. But the Karnataka High Court in the case of Stumpp, Schuele & Somappa Pvt. Ltd. v. 2nd ITO : [1976]102ITR320(KAR) has taken a diametrically opposite view and, therefore, the case cannot come within the ambit of Section 13 of the C. (P.) S.T. Act, 1964, and, accordingly, we answer question No. 2 in the negative and in favour of the assessee.

10. In view of our answer to question No. 2, we decline to answer question No. 1 which has become purely academic.

11. There will be no order as to costs.

Sudhindra Mohan Guha , J.

12. I agree.


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