Section 80J relief does not trigger proportionate reduction in surtax capital computation under the Second Schedule.

Relief granted under section 80J of the Income-tax Act, 1961 does not require a proportionate reduction in the assessee-company's capital computed for surtax under rule 4 of the Second Schedule to the Companies (Profits) Surtax Act, 1964. The capital base for surtax purposes remains unreduced merely because corresponding relief was allowed in income-tax assessments, and rule 4 does not mandate any adjustment on that account. The interpretation follows the binding view already taken on the same point and operates in favour of the assessee.

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Issues: Whether, in computing the capital of the assessee-company for surtax purposes under the Companies (Profits) Surtax Act, 1964, any reduction was required on account of relief obtained in income-tax assessments under section 80J of the Income-tax Act, 1961, and whether rule 4 of the Second Schedule to the Companies (Profits) Surtax Act, 1964, required a proportionate reduction on that account.

Analysis: The question referred was answered in the light of the binding decision already rendered on the same point, and it was accepted that the assessee's capital computation for surtax could not be reduced merely because it had obtained relief under section 80J in its income-tax assessments. On that footing, rule 4 of the Second Schedule was held not to warrant any proportionate reduction on account of such relief.

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

Final Conclusion: The reference was answered so that the assessee's capital for surtax purposes remained unreduced on account of section 80J relief.

Ratio Decidendi: Relief granted under section 80J of the Income-tax Act, 1961 does not require a proportionate reduction in the capital computed for surtax under rule 4 of the Second Schedule to the Companies (Profits) Surtax Act, 1964.

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