Surtax not deductible from income tax liability for assessment year 1975-76

The High Court of Allahabad held that the surtax payable by a company is not deductible in determining its income-tax liability for the assessment year 1975-76. The court relied on the precedent set by the Calcutta High Court, which considered surtax as an additional levy on a company's income, similar to income-tax or excess profits tax, and therefore not eligible for deduction. The decision favored the Revenue over the assessee, directing the Appellate Tribunal to proceed accordingly within fifteen days.

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Issues Involved: Interpretation of deduction of liability under the Companies (Profits) Surtax Act, 1964, in computing income from business under the Income-tax Act, 1961 for the assessment year 1975-76.

Summary:
The High Court of Allahabad was presented with a question from the Income-tax Appellate Tribunal regarding the deduction of liability under the Companies (Profits) Surtax Act, 1964, in the computation of income from business for the assessment year 1975-76. The assessee, a private limited company engaged in the manufacture and sale of ayurvedic and unani medicines, sought to deduct the surtax payable from its business profits for the year in question. However, this claim was rejected by the lower authorities and the Tribunal.

The High Court noted the conflicting views among different High Courts on whether surtax is deductible in computing a company's income under the Income-tax Act, 1961. The Calcutta High Court, in the case of Molins of India Ltd. v. CIT, held that surtax is akin to income-tax or excess profits tax, being an additional levy on a company's income, and thus not deductible in determining income-tax liability. Conversely, the Gauhati High Court in Doom Dooma Tea Co. Ltd. v. CIT took the stance that surtax is distinct from income-tax and should be allowed as a deduction under section 37 of the Income-tax Act.

Ultimately, the High Court of Allahabad sided with the view of the Calcutta High Court, ruling that the surtax payable by a company is not deductible in determining its income-tax liability. Consequently, the referred question was answered in the affirmative, against the assessee and in favor of the Revenue. The Appellate Tribunal was directed to proceed in accordance with this decision within fifteen days.

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