Deductibility of income-tax interest and surtax rejected under binding Supreme Court precedent, leaving both claims disallowed.

Interest liability arising under the Income-tax Act was held not to be deductible in computing business profits, because the point was already settled by binding Supreme Court precedent. Surtax liability was also held not to be an allowable deduction in computing total income, again following the Supreme Court's earlier ruling. Both referred questions were answered against the assessee and in favour of the Revenue, and the reference was disposed of accordingly.

---

---

Issues: (i) Whether interest liability incurred under various provisions of the Income-tax Act was an allowable deduction in computing business profits for the relevant assessment year; (ii) Whether liability to pay surtax was an allowable deduction in computing the assessee's total income for the relevant assessment year.

Issue (i): Whether interest liability incurred under various provisions of the Income-tax Act was an allowable deduction in computing business profits for the relevant assessment year.

Analysis: The issue was governed by the binding decision of the Supreme Court, which had already settled that such interest liability is not deductible in computing profits and gains.

Conclusion: The question was answered in the negative, against the assessee and in favour of the Revenue.

Issue (ii): Whether liability to pay surtax was an allowable deduction in computing the assessee's total income for the relevant assessment year.

Analysis: The issue was likewise covered by the binding decision of the Supreme Court, which held that surtax liability is not an allowable deduction in computing total income.

Conclusion: The question was answered in the negative, against the assessee and in favour of the Revenue.

Final Conclusion: Both referred questions were answered against the assessee, and the reference was disposed of accordingly.

Ratio Decidendi: A liability arising as interest on income-tax dues, and a liability to pay surtax, are not allowable deductions in computing taxable profits or total income where the issue is covered by binding Supreme Court precedent.

---