TMI Blog1993 (3) TMI 51X X X X Extracts X X X X X X X X Extracts X X X X ..... e invoked for the purpose of reducing the capital base proportionately having regard to the deductions the assessee-company had obtained in terms of Chapter VI-A of the Income-tax Act in the computation of its total income ? (2) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the excess provision for taxation is includible in the capital base of the assessee-company for the purpose of surtax assessments ? (3) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that in computing the chargeable profits under the First Schedule to the Act, the total income computed under the Income-tax Act, 1961, should be adjusted by excluding the total amount of dividend received and not the reduced dividend after deduction of allowances under sections 80K and 80M in computing the income for income-tax purposes ?" At the outset, Shri Mistry, learned counsel for the assessee, and Dr. Balasubramaniam, learned counsel for the Revenue, stated that, in view of the decisions of the Supreme Court in the cases, in ITO (Second) v. Stumpp, Schuele and Somappa P. Ltd. [1991] 187 ITR 108 and Vazi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 80K/80M of the 1961 Act) of Rs. 2,48,800, Rs. 4,09,007 and Rs. 17,258 was included in the total income of the respective years under reference in the assessments framed under the 1961 Act. In the assessment proceedings under the Surtax Act, the assessees claimed before their respective Surtax Officers ("the S. T. O."), that in computing their chargeable profits as per the First Schedule to the Surtax Act, the aggregate dividend of Rs. 6,69,450, Rs. 6,51,678 and Rs. 9,43,144, respectively, should be excluded from the total income worked out under section 143(3) of the 1961 Act by virtue of rule 1(viii) of the said Schedule. The Surtax Officer, however, was of the view that the income by way of dividend (after deduction under section 80K/80M of the 1961 Act of) Rs.2,48,800, Rs. 4,09,007 and Rs. 17,258, respectively, only could be excluded. In appeal, however, both the Appellate Assistant Commissioner of Income-tax and the Income-tax Appellate Tribunal accepted the assessees' stand that the income by way of dividend, prior to deduction under section 80K/80M of the 1961 Act, should be excluded from the total income of the assessee for the respective years in view of the clear p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Delhi High Court in the case of Commr. of Surtax v. Modi Industries Ltd. (No. 2) [1993] 200 ITR 325, where the court has taken a view in favour of the Revenue on a similar issue which came up for its consideration. In conclusion, he once again urged that since in the case of Banque Nationale De Paris [1992] 194 ITR 167, this High Court was not directly concerned with the issue involved in the present reference, certain observations made by the court in connection with the Explanation inserted in rule I of the First Schedule to the Surtax Act, with effect from April 1, 1981, by the Finance Act, 1981, should not influence our mind in deciding the question referred to us. Shri Dwarkadas, learned counsel for Messrs. Standard Mills Co. Ltd., apart from adopting the arguments made in the case of Messrs. Voltas Ltd., invited our attention to section 2(5) of the Surtax Act which defines "chargeable profits" as well as rule 1(viii) of the First Schedule to the Surtax Act to urge that the aggregate dividend received by the assessee after deduction of expenses, etc., under section 57(iii) of the 1961 Act, should be excluded from the total income in determining the chargeable profits as pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITR 243, the Supreme Court held that, in computing the taxable income for the purposes of the Income-tax Act, the deduction in respect of intercorporate dividends should be allowed on the gross amount of such dividends received by the company and not with reference to the net amount. . . . Since this decision ran counter to the legislative intent to grant such deduction with reference to the net income by way of dividends only, the Finance (No. 2) Act, 1980, inserted a new section 80AA in the Income-tax Act clarifying the intention with retrospective effect from April 1, 1968. In several cases, High Courts have held that, even for the purposes of determining chargeable profits under the Companies (Profits) Surtax Act, the gross amount of dividends should be excluded from the total income . . . . and, accordingly, the High Court rulings have resulted in giving an unintended benefit to companies in respect of dividends received by them from domestic companies.' Hence, the Explanation was added to rule 1 of Schedule I. The insertion of the Explanation, therefore, does not help the assessee in anyway." The fact that, in the above case, the court was dealing with the first part of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
