1982 (11) TMI 59 - AT - Income Tax

Summary

Issues Involved:
1. Whether the gross amount of surcharge on income-tax should be deducted for computing chargeable profits.
2. Whether a deposit made under the Companies Deposits (Surcharge of Income-tax) Scheme, 1976, can be treated as a payment of surcharge.

Issue-Wise Detailed Analysis:

1. Whether the gross amount of surcharge on income-tax should be deducted for computing chargeable profits:
The assessee company claimed that the gross amount of surcharge on income-tax payable, Rs. 23,729, should be deducted under section 2(5) read with rule 2(i) of the First Schedule of the Companies (Profits) Surtax Act, 1964, for computing chargeable profits. The argument was that the deposit of Rs. 22,100 under the Companies Deposits (Surcharge of Income-tax) Scheme, 1976, should be considered as payment of surcharge as envisaged under section 2(8) of the Finance Act, 1976.

Both the STO and the Commissioner (Appeals) rejected this claim, holding that the net amount of income-tax determined as payable, i.e., Rs. 1,629, should be deducted for computing chargeable profits. The Tribunal examined the relevant provisions and concluded that the total income should be reduced by the amount of income-tax payable after taking into account all allowances, relief, rebate, or deduction in respect of income-tax.

2. Whether a deposit made under the Companies Deposits (Surcharge of Income-tax) Scheme, 1976, can be treated as a payment of surcharge:
The Tribunal considered whether the deposit of Rs. 22,100 made by the assessee under the scheme, which reduced the surcharge liability from Rs. 23,729 to Rs. 1,629, could be treated as a payment of surcharge. Section 2(8) of the Finance Act, 1976, was referred to, which allowed the surcharge on income-tax payable to be reduced by the amount of the deposit. However, it did not equate the deposit with the payment of surcharge.

The Tribunal noted that a deposit is different from a payment, as the former is for a fixed term and carries interest, whereas the latter is an outright payment. The Tribunal concluded that the deposit under the scheme could not be treated as a payment of surcharge.

The Tribunal also reviewed the speech of the Finance Minister, Notes on Clauses, and the Memorandum explaining the provisions of the Finance Bill, 1976. These documents indicated that the purpose of the deposit was to reduce the surcharge liability, not to treat the deposit as a payment of surcharge. The Tribunal emphasized that the Income-tax Act and the Companies (Profits) Surtax Act are separate, and an amendment in one does not automatically affect the other.

The Tribunal rejected the argument that non-treatment of the deposit as a payment of surcharge would negate the relief provided under section 2(8) of the Finance Act, 1976. It was noted that the assessee received full deduction for the deposit concerning its surcharge liability, and there was no taking back of the relief. The Tribunal also dismissed the relevance of the Supreme Court decision in CIT v. S.A.S. Marimuthu Nadar, which dealt with a different issue.

The Tribunal concluded that the provisions of section 2(8) of the Finance Act, 1976, aimed to reduce the surcharge liability by the amount of the deposit, not to treat the deposit as a payment of surcharge. Therefore, the assessee was not entitled to deduct the gross amount of its surcharge liability for computing chargeable profits.

Conclusion:
In conclusion, the Tribunal dismissed the appeal, holding that the net amount of income-tax payable, after accounting for the deposit under the Companies Deposits (Surcharge of Income-tax) Scheme, 1976, should be deducted for computing chargeable profits. The deposit could not be treated as a payment of surcharge.