TMI Blog1978 (6) TMI 38X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment to income-tax had to be deducted in determining the capital of the assessee-company as at July 1, 1969, for the purpose of assessment to surtax for the assessment year 1971-72 ?" The assessee before us is Ballarpur Industries Ltd., previously known as Ballarpur Paper and Straw Board Mills Ltd., Ballarpur. We are concerned with their liability to surtax for the assessment year 1971-72. The chargeable period for the said assessment was the year ended 30th June, 1970, and the capital for the purpose of determining the standard deduction was thus required to be determined as on 1st July, 1969. The assessee had initially filed the return and thereafter revised the same. In its return the assessee in working out the capital base as on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clusion of the Tribunal which has been assailed by the Commissioner in this reference. Under the Companies (Profits) Surtax Act, 1964, "statutory deduction" is defined by s. 2(8) ; it means 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. We are not concerned with the two provisos to the said section. The Second Schedule to the Act thus contains rules for computing the capital of a company for the purposes of surtax. We are concerned with r. 4 of the Second Schedule, which is in the following words : "4. Where a part of the income, profits and gains of a company is not includible in its t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wn at the bar, we may note also that s. 80B in Chap. VI-A contains certain definitions but which by the opening words of the section are restricted for the purposes of that chapter only. Our attention was drawn by counsel for the Commissioner to the definition of "gross total income" contained in s. 80B(5), which reads as follows : " 'gross total income' means the total income computed in accordance with the provisions of this Act, before making any deduction under this Chapter or under section 280-O." In order to deal with the rival contentions a brief legislative history of the Surtax Act and the provisions of the I.T. Act, 1961, may be given. The Surtax Act was enacted in the year 1964 in order to impose a special tax on companies on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... visions of r. 4, it was observed that the provisions of r. 4 of the Second Schedule will be attracted only if a part of the income, profits and gains of a company is includible in its total income. It was observed, after noting the Chapter headings of Chapters III and VII, that there was material difference between the topics dealt with in Chapter III and those dealt with in Chapter VII. Chapter III only dealt with such items of income which do not form part of the total income whilst Chapter VII dealt with items of income which form part of total income on which no income-tax was payable. It was observed that simply because under the provisions of the said Chapter (i.e., Chapter VII) no tax was payable on a particular item of income formin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered judgment has noted all the relevant facts and observed ( [1976] 102 ITR 320, 325) : "The expression 'not includible' means not capable of being included. It cannot refer to an amount which already forms part of the gross total income and which would be later on deducted for purposes of determining the tax liability under Chapter VI-A." It was further observed : "It is significant that the expression 'shall not be included', which is found in ss. 10 and 11 which are in Chapter III, the title of which is 'incomes which do not form part of total income', is not used in any of the provisions contained in ss. 80C to 80U. Similarly, the said expression is not used in Chapter IV of the Income-tax Act providing for the method of computa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... these as the language of the provisions under consideration is quite clear. In accordance with the view taken by our High Court (dealing with s. 84) and in accordance with the views expressed by the Karnataka High Court, the adjustment required to be made under r. 4 is not in respect of deductions or reliefs from total income allowed under Chapter VI-A or under Chapter VII originally, but is only in respect of incomes excluded from total income under Chapter III. If that be the correct view, and in our opinion, this is the correct view, then the conclusion reached by the Tribunal is in order and the contention advanced contrary thereto by counsel for the Commissioner is required to be rejected. In the result, the question referred to us ..... X X X X Extracts X X X X X X X X Extracts X X X X
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