TMI Blog1977 (1) TMI 11X X X X Extracts X X X X X X X X Extracts X X X X ..... ccordance with the provisions of the First Schedule. Section 2(9) defines " standard deduction ". It means, inter alia, an amount equal to 6% of the capital of the company as computed in accordance with the provisions of the Second Schedule, or an amount of fifty thousand rupees, whichever is greater. Section 4 is the charging section. It says: " Subject to the provisions contained in this Act, there shall be charged on every company for every assessment year commencing on and from the 1st day of April, 1963, a tax (in this Act referred to as the super profits tax) in respect of so much of its chargeable Profits of the previous year or previous years, as the case may be, as exceed the standard deduction at the rate or rates specifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isions we have to examine the facts of this case. For the assessment year 1963-64, the ITO proceeded to compute the capital of the assesses under the Super Profits Tax Act, by reducing from its capital an amount of Rs. 32,44,340 representing the investment in shares. The assesses was doing, business at the material time and had also held certain shares by way of investment. It received dividends on shares of the value of about Rs. 18 lakhs. On the balance of the shares it did not receive any dividends during the year under consideration. After reducing the capital by Rs. 32,44,340, the ITO found that the result was a negative figure. He, therefore, gave a standard deduction of Rs. 50,000 to the assessee. Before the AAC, it was contended ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r r. 1 of the Second Schedule would not, according to the AAC, arise. He was of the view that the dividend Income had to be kept out of the chargeable profits in the same way as the corresponding investments have to be kept out of the capital base. The matter then went to the Tribunal. Before the Tribunal also the contention of the assessee's representative was that only those investments which have yielded dividends included in the total income are to be excluded from the capital base. In the year in question the assesses did not receive dividends in respect of some of the shares. It was, therefore, argued that the cost of the shares for which no dividends were received should be included in the capital. The departmental representati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d income which had not been included in the total income of any previous year, the question of excluding such dividend income cannot and does not arise. According to Dr. Pal, r. 1 of the First Schedule does not deal with any notional or hypothetical situation. It deals with the actualities ih a given case. The legislature has not used the expression in r. 1 of the First Schedule that " certain incomes shall be excludible " from such total income. It employs the words " shall be excluded " from the total income. This shows that only when some income like the dividend income has been included in computing the total income there is a clear mandate to exclude that income, and not any hypothetical or notional income from the total income so c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance with the Second Schedule or Rs. 50,000, whichever is greater. The capital for purposes of standard deduction is to be determined in accordance with the Second Schedule. If after giving all the deductions the figure that is arrived at is a minus figure or a plus figure of Rs. 50,000 only the assessee is entitled to get a general deduction of Rs. 50,000. Whether or not the particular asset has yielded any income does not seem to be material for the purpose of the Second Schedule. This Schedule only describes the whose cost has to be excluded. In other words, it deals with the description or character of the assets. The words used in the Second Schedule are " is not includible ". The word " includible " means capable of being included : v ..... X X X X Extracts X X X X X X X X Extracts X X X X
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