TMI Blog1983 (9) TMI 84X X X X Extracts X X X X X X X X Extracts X X X X ..... ear relevant to the assessment year 1975-76, although such assets had been purchased and brought into use for scientific research in the earlier years and full deduction under section 35 had been given in those years ? (2) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that surtax payable under the Companies (Profits) Surtax Act, 1964, was an inadmissible deduction in computing the total income of the assessee ? (3) Whether, on the facts and in the circumstances of the case, the interest payable under section 220(2) of the Income-tax Act, 1961, was as allowable deduction in computing the profits of the assessee ? (4) Whether, on the facts and in the circumstances of the case, the section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... im and the AAC confirmed it. In further appeal by the assessee, the Tribunal also confirmed the disallowances. The assessee's counsel has nothing much to say on this question. Apart from the decision of the Punjab Haryana High Court in CIT v. Oriental Carpet Manufacturers (India) P. Ltd. [1973] 90 ITR 373, relied upon by the Tribunal, the High Courts of Bombay and Calcutta also have taken similar view in Aruna Mills Ltd. v. CIT [1957] 31 ITR 153 (Bom) and Balmer Lawrie Co. Ltd. v. CIT [1960] 39 ITR 751 (Cal). There could, therefore, be no doubt, in view of the settled position in law, that the interest paid on account of delay in payment of tax cannot be regarded as having been incurred for business purposes. Question No. 3 must, ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he provisions of the Surtax Act. It is, therefore, a special tax levied under a separate statute and scheme independent of and different from the manner the profits and gains of business are brought to tax under the I.T. Act. Sri. K. Srinivasan for the Revenue, on the other hand, urged that surtax is a tax on the profits and gains of a business of the company and is similar to income-tax in all its characteristics and the income-tax is not an allowable deduction at all and tax is always a charge on the profits after it is earned. There is no dispute and indeed cannot be disputed that if the surtax is a tax on the profits and gains of business, it is not an allowable deduction under the Act. The Privy Council in Ashton Gas Co. v. Attorney ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the rate or rates specified in the Third Schedule. Section 2 (8) defines " statutory deduction " as an amount equal to ten per cent. of the capital of the company as computed in accordance with the provisions of the Second Schedule or an amount of two hundred thousand rupees, whichever is greater. Schedule I contains rules for computing chargeable profits of a company. For purposes of arriving at the chargeable profits under the Surtax Act, the total income of an assessee computed under the I.T. Act for any previous year and adjusted in accordance with the provisions of the First Schedule, constitutes the basis or starting point for purposes of levy of surtax. For computing the chargeable profits certain income enumerated in r. 1 of Sc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urtax remains ultimately a charge on the profits and gains of the companies. The next contention urged by Sri Sarangan relates to the scope of s. 40(a)(ii) of the Act as to its applicability to surtax. Section 40 imposes a prohibition on the amounts referred to therein such as, (i) the interest chargeable under the Act, (ii) any sum paid on account of any rates or tax levied on profits and gains of any business or profession, and (iii) any sum paid on account of wealth-tax and other amounts, from being claimed as amounts eligible for deduction in computing the total income. Brief reference may now be made to some of the decisions relied on by the learned counsel in this aspect of the matter. He cited the following among other decisions: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld not proceed on the premise that the Legislature has enacted a superfluous or unnecessary provisions. Chapter XI provides for levy of additional income-tax on undistributed profits of the company. Under s. 109 the total income of a company is reduced by the amount of any income-tax payable under s. 104 and other taxes and sums referred to therein in order to arrive at the " distributable income ". On the other hand, s. 15 of the Surtax Act provides for deducting surtax in computing the distributable income under the I.T. Act, notwithstanding anything contained in cl. (i) of s. 109. This is an additional relief intended to be given to " closely held companies " while computing the distributable income for the purpose of Chap. XI-D of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X
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