Capital computation under surtax law excludes section 80-I deductions from rule 4 adjustments, following binding precedent.

Amounts deducted under section 80-I of the Income-tax Act are not to be included or adjusted as capital under rule 4 of the Second Schedule to the Companies (Profits) Surtax Act, 1964. The text follows binding precedent that rule 4 cannot be construed to bring section 80-I, and similarly section 80J, deductions into the capital computation. On that basis, the issue of capital computation was decided in favour of the assessee and against the Revenue.

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Issues: Whether, for the purpose of computation of capital under rule 4 of the Second Schedule to the Companies (Profits) Surtax Act, 1964, deductions allowed under section 80-I of the Income-tax Act, 1961 are to be excluded.

Analysis: The reference was governed by an earlier decision of the Karnataka High Court, which had held that rule 4 of the Second Schedule cannot be construed to bring within capital computation deductions granted under sections 80-I and 80J. That view had already been affirmed by the Supreme Court, and the Tribunal had followed the same binding position.

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

Ratio Decidendi: Amounts deducted under section 80-I do not fall to be included or adjusted as capital under rule 4 of the Second Schedule to the Companies (Profits) Surtax Act, 1964.

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