Jurisdictional writ relief and surtax capital reduction clarified: deductions under sections 80-I and 80J do not trigger rule 4.

Article 226 relief may still be available despite an alternative appellate or reference remedy where the challenge goes to jurisdiction and turns on a pure question of statutory construction. Rule 4 of the Second Schedule to the Companies (Profits) Surtax Act applies only to income not includible in total income under the Income-tax Act, not to deductions allowed in computing total income. Relief under sections 80-I and 80J therefore did not require proportionate reduction of capital, and notices issued on that basis were without jurisdiction and quashed.

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Issues: (i) Whether the writ court could interfere under Article 226 of the Constitution of India notwithstanding the availability of an appellate and reference remedy under the Companies (Profits) Surtax Act, 1964. (ii) Whether relief granted under sections 80-I and 80J of the Income-tax Act, 1961, required a proportionate reduction of capital under rule 4 of the Second Schedule to the Companies (Profits) Surtax Act, 1964.

Issue (i): Whether the writ court could interfere under Article 226 of the Constitution of India notwithstanding the availability of an appellate and reference remedy under the Companies (Profits) Surtax Act, 1964.

Analysis: The proposed action turned entirely on the construction of rule 4 of the Second Schedule. If the statutory basis invoked by the authority was unsustainable, the exercise of power would be without jurisdiction. In such a case, the existence of an alternative remedy does not operate as an absolute bar to writ relief, especially where no disputed questions of fact arise and the challenge is to jurisdiction itself.

Conclusion: The writ petition was maintainable and the assessee was entitled to invoke Article 226 of the Constitution of India.

Issue (ii): Whether relief granted under sections 80-I and 80J of the Income-tax Act, 1961, required a proportionate reduction of capital under rule 4 of the Second Schedule to the Companies (Profits) Surtax Act, 1964.

Analysis: Rule 4 applies only where a part of the income, profits and gains of a company is not includible in its total income as computed under the Income-tax Act. The expression was read in the setting of the Income-tax Act and was confined to items which do not form part of total income, such as incomes outside the charging or computation scheme of that Act. Reliefs under sections 80-I and 80J are deductions in the computation of total income and do not answer that description. The statutory scheme, the related forms and notes under the Surtax Rules, and the structure of the Act supported this distinction.

Conclusion: Relief under sections 80-I and 80J did not justify any reduction of capital under rule 4, and the notices issued for that purpose were without jurisdiction.

Final Conclusion: The notices issued under sections 8/16 of the Companies (Profits) Surtax Act, 1964, were quashed and the appeals challenging that result failed.

Ratio Decidendi: Rule 4 of the Second Schedule applies only to income that is not includible in total income under the Income-tax Act, and deductions allowed under sections 80-I and 80J are not such income for the purpose of reducing capital in surtax computation.

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