Computation machinery failure prevents super profits tax on a company in liquidation under the statutory scheme.

A company in liquidation was held not chargeable to super profits tax under the Super Profits Tax Act, 1963 because the statutory computation mechanism could not be applied. The charge under section 4 depended on chargeable profits exceeding the standard deduction, and the standard deduction required capital to be computed by identifying paid-up share capital and reserves under the Second Schedule and Rule 1. Once the company was in liquidation, its assets formed a single fund in the hands of the liquidator and the distinction between capital, reserves and accumulated profits disappeared. As the computation provisions failed entirely, the charging provision also could not operate.

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Issues: Whether a company in liquidation is liable to super profits tax under the Super Profits Tax Act, 1963 when its paid-up share capital and reserves cannot be separately identified for computing capital and standard deduction.

Analysis: The charge under section 4 of the Act operates only where chargeable profits exceed the standard deduction. Standard deduction is computed with reference to the capital of the company under the Second Schedule, and Rule 1 requires identification of paid-up share capital and reserves as on the first day of the previous year. After liquidation, the company's assets form one consolidated fund in the hands of the liquidator, and the distinction between capital, reserves and accumulated profits disappears. In such a situation, the computation mechanism in the Act cannot be applied, and where the computation provisions fail, the charging provision does not operate.

Conclusion: A company in liquidation is not chargeable to super profits tax under the Act because the statutory basis for computing capital and standard deduction is incapable of application.

Ratio Decidendi: A charging provision that depends on specific computation machinery does not apply where the requisite computation cannot be carried out at all.

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