Interest on delayed tax payment is not deductible as income-tax in surtax computation under the First Schedule.

Rule 2 of the First Schedule to the Companies (Profits) Surtax Act, 1964 permits reduction only of the amount of income-tax payable by the company in respect of its total income. Interest charged under section 217(1A) and section 139(8) of the Income-tax Act, 1961 is a distinct liability from income-tax, and the statutory scheme treats tax and interest separately. The self-contained surtax computation does not extend the deduction to interest for delayed payment or delayed filing. Accordingly, interest under those provisions cannot be deducted as income-tax while computing net chargeable profits under the Surtax Act.

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Issues: Whether interest payable under section 217(1A) and section 139(8) of the Income-tax Act, 1961, could be treated as part of the amount of income-tax payable by the company for reduction under rule 2 of the First Schedule to the Companies (Profits) Surtax Act, 1964.

Analysis: Rule 2 of the First Schedule expressly permits reduction only of the amount of income-tax payable by the company in respect of its total income, subject to the stated exclusions. The computation scheme under the Surtax Act is self-contained and exhaustive, and the language of rule 2 does not extend to interest payable for delayed payment of tax. The provisions defining tax and interest under the Income-tax Act, 1961, treat them as distinct concepts. Section 139(8) creates liability to simple interest on delayed filing, section 156 separately refers to tax, interest, penalty and other sums, and section 217(1A) likewise distinguishes interest from income-tax. The cited authorities on penalty and interest did not support treating such interest as tax for the purpose of surtax computation.

Conclusion: Interest charged under section 217(1A) and section 139(8) of the Income-tax Act, 1961, is not part of income-tax for reduction under rule 2 of the First Schedule to the Companies (Profits) Surtax Act, 1964, and the claim of the assessee was rightly rejected.

Final Conclusion: The reference was answered against the assessee, and the Tribunal's view was upheld that interest on delayed payment of income-tax cannot be deducted as income-tax in computing net chargeable profits under the Surtax Act.

Ratio Decidendi: For computation of chargeable profits under rule 2 of the First Schedule to the Companies (Profits) Surtax Act, 1964, only the amount of income-tax payable is deductible, and interest for delayed payment of tax remains a distinct liability not included in income-tax.

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