TMI Blog1974 (9) TMI 25X X X X Extracts X X X X X X X X Extracts X X X X ..... 6 of the Act in respect of assessment year 1969-70. Writ Petitions Nos. 2551 and 2552 of 1974 are filed by International Instruments Private Ltd. questioning the validity of the notices issued by the Income-tax Officer under section 8 of the Act in respect of the assessment years 1970-71 and 1971-72. The petitioners are assessees under the Act. The assessments during the relevant years were completed under the Act by the income-tax authorities and the amounts demanded from them were paid by the petitioners. It would appear that in the year 1973, the Income-tax Officer was of the view that there has been under assessment under the Act in the case of the petitioners in Writ Petitions Nos. 3447 and 3448 of 1973 and 2551 and 2552 of 1974 and issued notices under section 8 of the Act to the petitioners to show cause as to why action should not be taken to reassess the petitioners. Similarly, the Commissioner of Income-tax was of the view that the order passed by the Income-tax Officer against the petitioners in Writ Petitions Nos. 3578 of 1973 and 1173 of 1974 was prejudicial to the interests of the revenue and issued notices under section 16 of the Act asking them to show cause is t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ard by the petitioners in these cases and that the claim of the department that there has been an under-assessment is patently contrary to the provisions of law, I am of the view that the preliminary objection regarding the maintainability of these writ petitions has to be overruled. It is accordingly overruled. In order to deal with the contentions of the parties it is necessary to give a brief summary of the relevant provisions of the Act. The Act was passed in the year 1964 in order to impose a special tax on companies (other than those which have no share capital) on their excess profits, namely, the amount by which the total income of a company as reduced by certain types of income and certain sums and the income-tax and super-tax payable by it exceeds 10 per cent. of its capital, reserves and certain borrowed money or a sum of Rs. 2 lakhs, whichever is higher. Section 4 of the Act which is the charging section provides that there shall be charged on every company for every assessment year commencing on and from the first day of April, 1964, a tax known as surtax in respect of so much of its chargeable profits of the previous year or previous years, as the case may be, as e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll these cases an excessive allowance by way of statutory deduction because the capital ascertained in accordance with the rules 1, 2 and 3 had not been diminished by a proportionate amount having regard to the deductions allowed under sections 80-I and 80J of the Act. Hence, the Income-tax Officer issued notices under section 8 in some of the above cases and the Commissioner issued notices under section 16 in the other cases. The correctness or otherwise of the view taken by the authorities depends upon the construction to be placed on rule 4 of the Second Schedule of the Act and the meaning to be given to the expression "income, profits, and gains of a company............not includible in its total income as computed under the Income-tax Act " appearing in rule 4. In order to understand the meaning of the above expression it would be necessary to refer to some of the provisions of the Income-tax Act as it stood when the Act was passed in the year 1964. Chapter III of the Income-tax Act refers to the incomes which do not form a part of total income. Chapter V deals with cases where income of other persons has to be included in the assessee's total income and Chapter VII refers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by Parliament provides that in computing the total income of the previous year of any person any income falling within the clauses mentioned therein shall not be included. Similarly, section 11 provides that the incomes referred to therein shall not be included in the total income of the previous year of the person in receipt of the income for purposes of the levy of income-tax. It is significant that the expression "shall not be included" which is found in sections 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 sections 80C to 80U. Similarly, the said expression is not used in Chapter IV of the Income-tax Act providing for the method of computation of the income under which the assessee is allowed deductions by way of expenses, rebates, allowances, etc. Both in Chapter IV and Chapter VI-A, Parliament has consistently used the words "deduction shall be allowed" and not the expression "shall not be included". I am of the view that when the Act was passed Parliament was of the opinion that the expression "income, profits and gains of a company................................ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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