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1993 (12) TMI 111 - AT - Income TaxAssessing Officer, Assessment Year, Computation Of Capital, Development Rebate Reserve, Fixed Assets, General Reserve, Income Tax Records
Issues:
1. Rectification of surtax assessment for the assessment year 1981-82. 2. Treatment of development rebate reserve and excess of income-tax depreciation over book depreciation in computing capital base for surtax. 3. Interpretation of Rules under the Companies (Profits) Surtax Act. 4. Whether development rebate/investment allowance granted to the assessee could be treated as "income, profits and gains not includible in the total income". Detailed Analysis: Issue 1: The Assessing Officer rectified the surtax assessment for the year 1981-82 due to apparent mistakes in the original order. The rectification involved excluding a sum written back from the development rebate reserve and omitted excess income-tax depreciation from the capital base. The CIT(A) allowed the appeal on one count but not the other, leading to appeals by both the assessee and the Department. Issue 2: The dispute centered on the treatment of the development rebate reserve and the excess of income-tax depreciation over book depreciation in computing the capital base for surtax. The Assessing Officer reduced the capital base by a sum written back from the development rebate reserve. However, the Tribunal found no legal basis for this adjustment as the reserve should be considered part of the capital base as per the Second Schedule to the Companies (Profits) Surtax Act. Issue 3: The Tribunal analyzed the relevant rules under the Companies (Profits) Surtax Act, particularly Rule 1(iii) and Rule 1(ii) of the Second Schedule. It emphasized that development rebate reserve should be included in the computation of the capital base and that the Act does not provide for the specific adjustment made by the Assessing Officer. Issue 4: The Tribunal considered whether development rebate/investment allowance granted to the assessee could be treated as "income, profits and gains not includible in the total income." It concluded that such allowances are deductions allowed in computing the total income, and therefore, cannot be treated as income not includible in the total income. The Tribunal referred to a Supreme Court decision to support this interpretation. In conclusion, the Tribunal allowed the assessee's appeal and dismissed the departmental appeal, emphasizing the correct interpretation of the rules under the Companies (Profits) Surtax Act and the treatment of development rebate reserves in computing the capital base for surtax.
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