TMI Blog1997 (2) TMI 55X X X X Extracts X X X X X X X X Extracts X X X X ..... -company is included in the chargeable profits, the income-tax relatable to the said amount of interest is not liable to be reduced in the computation of chargeable profits?" For the assessment years 1975-76 and 1976-77 relating to the surtax proceedings before the Assessing Officer, the claim of the assessee was that since interest payable in respect of debentures is to be disallowed, the income-tax payable relatable to such disallowance must be calculated and allowed to the assessee as a deduction under rule 2 because under that rule the amount of income-tax payable by the company in respect of its total income must be deducted. The Income-tax Officer negatived this claim on the ground that there was no provision made for making such de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pany as a deduction under rule 2 because the rule provided that the amount of income-tax payable by the company in respect of its total income must be deducted from the total income arrived at. Learned counsel further submitted that the deduction of the tax payable on interest on long-term borrowals is to be deducted following what is stated under clause (ii) of Schedule I. According to learned counsel if the tax payable on interest is not deducted that would increase the total income and the tax payable thereon. According to learned counsel in order to bring the true meaning of the provisions contained in the First Schedule, the court can interpret the provisions contained in the First Schedule so as to enable the assessee to benefit. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble profits. It says that in computing the chargeable profits of a previous year, the total income computed for that year under the Income-tax Act shall be adjusted in the manner provided in rules 1 to 3. Rule 1 provided for exclusion of certain incomes from the total income computed for the purpose of income-tax. Rule 2 provided that from the income so adjusted the amount of income-tax payable by the company in respect of its total income under the provisions of the Income-tax Act, after making allowance for any relief, rebate or deduction in respect of income-tax to which the company may be entitled under the provisions of the said Act or the annual Finance Act, and after excluding from such amount the amount of income-tax relatable to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o to show that there is no provision for including the tax payable on the interest on long-term borrowals. When the tax payable on the long-term borrowals was not included for the purpose of determining the chargeable profits it is also not possible for giving deduction of the tax payable on interest which was not actually paid. Rule 2 specifically says exclusion of income-tax payment on certain income. There also income-tax payable on interest on long-term borrowals was not mentioned. What items of income have to be included and excluded are mentioned in clause (i) of the First Schedule. What kind of income-tax is to be paid or to be deducted is also stated in clause (ii). What items of income have to be added are also stated in rule 3. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ofits Tax Act can recompute the total income as per the provisions of the Income-tax Act if considered necessary in the proceedings under the Super Profits Tax Act. Such a contingency does not arise according to the facts arising in this case. In the present case, while computing the chargeable profits under the Surtax Act the Income-tax Officer followed the provisions contained in Schedule I to the Act. We cannot expect the Assessing Officer to read something which is not contemplated in the provisions of the Act. The fact remains that in the present case, the income-tax was not computed on the interest on long-term borrowals. There is no provision in the First Schedule to include the tax on interest on long-term borrowals. When such all ..... X X X X Extracts X X X X X X X X Extracts X X X X
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