1978 (11) TMI 20 - HC - Income Tax

Court rules on deductibility of expenses for super-tax calculation, upholds revenue's position.

Calcutta Landing And Shipping Company Limited Versus Commissioner Of Income-Tax

Calcutta Landing And Shipping Company Limited Versus Commissioner Of Income-Tax - [1980] 123 ITR 172 Issues Involved:1. Determination of the quantum on which the appellant was liable to pay additional super-tax.2. Applicability of section 105(1)(iii) of the Income-tax Act, 1961.Issue-Wise Detailed Analysis:1. Determination of the Quantum on which the Appellant was Liable to Pay Additional Super-tax:The primary issue was whether the sum of Rs. 49,479 could be taken into account for determining the quantum on which the appellant was liable to pay additional super-tax. The facts revealed that the assessee, Calcutta Landing & Shipping Co. Ltd., had increased its repair charges and compensatory allowance retrospectively, resulting in a claimed expenditure of Rs. 49,479. The Income Tax Officer (ITO) disallowed this claim, stating that the liability did not arise in the relevant accounting year. Consequently, the ITO initiated proceedings under section 104 of the Income-tax Act, 1961, for insufficient dividend distribution and imposed additional super-tax.The assessee contended that the expenditure should be considered for computing distributable income, arguing that it did not result in asset creation or enhancement. The Tribunal held that only expenses incurred or accrued during the previous year could be considered under section 104, dismissing the assessee's appeal. The High Court agreed, stating that the Rs. 49,479 was not incurred during the relevant previous year and thus could not reduce the distributable income.2. Applicability of Section 105(1)(iii) of the Income-tax Act, 1961:The second issue was whether the Tribunal's finding that the assessee's case did not fall within the purview of section 105(1)(iii) was correct. However, this question was not pressed by the assessee's counsel during the hearing, and thus, the court did not address it.Conclusion:The High Court concluded that the sum of Rs. 49,479 could not be taken into account for determining the quantum of additional super-tax, as it was not incurred during the relevant accounting period. The court also affirmed that the expenditure should not be considered in determining whether the profits were too small for a higher dividend distribution. Consequently, the revenue's position was upheld, and question No. 1 was answered in the affirmative and in favor of the revenue. Question No. 2 was not pressed and thus not answered. No order as to costs was made.