Chargeable profits computation excludes surcharge deposits; only net income-tax after statutory reliefs is deductible.

Rule 2(i) of the First Schedule to the Companies (Profits) Surtax Act, 1964 permits reduction only of income-tax actually payable after giving effect to statutory reliefs, rebates and deductions under the Income-tax Act or the Finance Act. A surcharge on income-tax, including any amount deposited under the Companies Deposits (Surcharge on Income-tax) Scheme, 1976, is not treated as a separate deductible item for computing chargeable profits. The reference in rule 2(ii) to tax actually paid outside India reinforces that the rule contemplates actual tax outgo after statutory adjustments, not a notional or additional liability.

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Issues: Whether the amount deposited by the company under the Companies Deposits (Surcharge on Income-tax) Scheme, 1976, or the surcharge on income-tax otherwise arising under the Finance Acts, was deductible in computing chargeable profits under rule 2(i) of the First Schedule to the Companies (Profits) Surtax Act, 1964.

Analysis: The charge of surtax is on chargeable profits as defined in section 2(5) of the Companies (Profits) Surtax Act, 1964, and the First Schedule requires reduction of the amount of income-tax payable by the company, after allowing for any relief, rebate or deduction available under the Income-tax Act or the annual Finance Act. The Court held that, even assuming surcharge remained exigible under the Finance Acts, the amount to be reduced under rule 2(i) is only the income-tax actually payable after giving effect to the relief or rebate granted by those enactments. The deposit made under the scheme could not be equated with deductible income-tax payable for the purpose of computing chargeable profits. The reference in rule 2(ii) to tax actually paid outside India supported the view that the rule contemplates actual outgo after statutory allowances, not notional liability.

Conclusion: The amount of surcharge on income-tax was not deductible in the computation of the assessee-company's chargeable profits; the question was answered in favour of the Revenue and against the assessee.

Ratio Decidendi: Under rule 2(i) of the First Schedule to the Companies (Profits) Surtax Act, 1964, only the net amount of income-tax actually payable after statutory reliefs, rebates and deductions can be reduced while computing chargeable profits, and a deposit made under a surcharge scheme does not create a further deductible item.

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