Binding precedent governed surtax computation, requiring gross dividend deduction and exclusion of investment cost item.

Earlier Madras High Court precedent governed both surtax questions, so the court applied the same rule consistently. Gross dividend income, rather than net dividend income, was required to be deducted in computing chargeable profits for the relevant assessment years, and the point was decided against the Revenue. The same binding approach also required exclusion of the sum of Rs. 2,45,000 while calculating the cost of investments under rule 2 of the Second Schedule to the Companies (Profits) Surtax Act, 1964, again against the Revenue. Both referred questions were thus answered in favour of the assessee.

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Issues: (i) Whether gross dividend income, and not net dividend income, was to be deducted while computing chargeable profits for surtax for the assessment years 1971-72 and 1972-73. (ii) Whether the sum of Rs. 2,45,000 was to be excluded while calculating the cost of investments for applying rule 2 of the Second Schedule to the Companies (Profits) Surtax Act, 1964.

Issue (i): Whether gross dividend income, and not net dividend income, was to be deducted while computing chargeable profits for surtax for the assessment years 1971-72 and 1972-73.

Analysis: The issue was treated as covered by an earlier decision of the same High Court on the point. The court followed that decision and applied the same principle to the present assessment years.

Conclusion: The issue was answered against the Revenue and in favour of the assessee.

Issue (ii): Whether the sum of Rs. 2,45,000 was to be excluded while calculating the cost of investments for applying rule 2 of the Second Schedule to the Companies (Profits) Surtax Act, 1964.

Analysis: This question was also held to be covered by an earlier decision of the same High Court, which had decided the point against the Revenue. The same view was applied without departure.

Conclusion: The issue was answered against the Revenue and in favour of the assessee.

Final Conclusion: Both referred questions were decided in favour of the assessee, leaving the Revenue unsuccessful on the merits of the reference.

Ratio Decidendi: When a point is already covered by binding precedent of the same court, the same rule is to be applied consistently to answer the referred tax questions.

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