Penalty is not "income-tax" for super profits tax computation under rule 2(i); deduction denied on strict statutory construction.

For rule 2(i) of the First Schedule to the Super Profits Tax Act, 1963, "income-tax" means only the tax levied under the charging provision of the Income-tax Act, 1961. Penalty imposed under section 271(1)(a) is distinct from income-tax, because the statutory scheme separately treats tax, penalty, interest and fine. The phrase in rule 2(i) was not construed broadly enough to include penalty merely because it arises in connection with tax liability. On that construction, penalty paid or payable under section 271(1)(a) is not deductible as income-tax for super profits tax computation.

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Issues: Whether penalty levied under section 271(1)(a) of the Income-tax Act, 1961, is deductible as "income-tax" under rule 2(i) of the First Schedule to the Super Profits Tax Act, 1963.

Analysis: The charge under the Super Profits Tax Act is confined to chargeable profits computed in accordance with the First Schedule. The expression "income-tax" in rule 2(i) refers to the tax charged under the charging provision of the Income-tax Act, and not to amounts payable by way of penalty, interest, or fine under other provisions of that Act. The statutory scheme itself distinguishes between tax, penalty, interest, and fine. The wording of rule 2(i) did not justify enlarging the expression "income-tax" to include penalty merely because it is payable in connection with tax liability. The court therefore rejected the wider construction sought for the assessee.

Conclusion: Penalty paid or payable under section 271(1)(a) of the Income-tax Act, 1961, is not deductible under rule 2(i) of the First Schedule to the Super Profits Tax Act, 1963; the answer to the referred question was in the affirmative and against the assessee.

Ratio Decidendi: For the purposes of rule 2(i) of the First Schedule to the Super Profits Tax Act, 1963, "income-tax" means only the tax levied under the charging provision of the Income-tax Act and does not include penalty imposed under the penalty provisions of that Act.

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