9911796707
TMI Blog1994 (1) TMI 83X X X X Extracts X X X X X X X X Extracts X X X X ..... aw in coming to the conclusion that the rectification order under section 13 passed by the Surtax Officer was valid ? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the deposit made with the Industrial Development Bank of India (I. D. B. I.) for a sum of Rs. 9,23,283 in lieu of surcharge on income-tax was not deductible for computing the chargeable profits under the Surtax Act ?" The assessee-company was assessed under the provisions of the Act for the assessment year 1977-78 and chargeable profits were computed after giving deduction for income-tax without reducing to the extent of deposit in Industrial Development Bank of India payable thereon. The chargeable profits under th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chargeable profits was challenged before the Commissioner of Income-tax (Appeals), who held that the deposit made under the said scheme to avoid payment of surcharge was not allowable as deduction under rule 2(i) of the First Schedule to the Act. Against the order dismissing the appeal, the assessee approached the Tribunal and the Tribunal rejected the assessee's claim and confirmed the order of the lower authorities On the ground that actual liability for surcharge was reduced on account of deposit with the Industrial Development Bank of India. It was contended on behalf of the assessee by Mr. Shah, that the Finance Act, 1976, provided for an alternative mode for payment of surcharge and, on deposit being made by the assessee in lieu of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, and adjusted in accordance with the provisions of the First Schedule. Statutory deduction as defined in section 2(8) means an amount equal to 15 per cent. of the capital of the company as computed in accordance with the provisions of the Second Schedule, or an amount of rupees 2,00,000, whichever is greater. Section 2(8) of the Finance Act, 1976, which is relevant in the present context reads as follows: "2. (8) Where an assessee, being a company, makes, during the financial year commencing on the first day of April, 1976, any deposit with the Industrial Development Bank of India established under the Industrial Development Bank of India Act, 1964 (18 of 1964), under any such scheme as the Central Government may, by notification in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the deposit made with the Industrial Development Bank of India cannot be treated as tax paid. The payment of deposit essentially differs from payment of tax and though the liability to pay the surcharge is taken away by making the deposit with the Industrial Development Bank of India, it cannot be treated as any deemed payment of surcharge. If it was intended to be treated as deemed payment of surcharge, there would have been no need to provide in section 2(8) of the Finance Act, 1976, that surcharge payable would be "nil" in such cases of deposit of the entire amount with the Industrial Development Bank of India. It is evident that the amount of deposit would be repaid after the prescribed period is over, to the assessee, which would ..... X X X X Extracts X X X X X X X X Extracts X X X X
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