Tribunal adjusts tax rate to 20.01% & includes 'other income' for revised deduction.

The Tribunal directed the AO to adjust the effective Indian rate of tax to 20.01% by including surcharge and education cess. Additionally, 'other income' was deemed necessary to be included in the net profit ratio for Ghana receipts, resulting in a revised deduction of Rs.1,02,30,909. The appeal was partially allowed, instructing the AO to recalculate the income accordingly.

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Issues Involved:
1. Effective Indian rate of tax.
2. Effective rate of tax in Ghana.
3. Doubly taxed income.

Detailed Analysis:

Issue 1: Effective Indian Rate of Tax
The assessee contended that the AO and CIT(A) incorrectly excluded surcharge and education cess from the effective Indian rate of tax. The Supreme Court in CIT vs K Srinivasan (1972 AIR 491) clarified that "income tax" includes surcharge and additional surcharge. Thus, the effective Indian rate of tax should be 20.01% instead of 18.50%.

Issue 2: Effective Rate of Tax in Ghana
The AO excluded 'other income' while determining the net profit ratio to compute the net profit on Ghana receipts. The CIT(A) upheld this exclusion, reasoning that no expenses were incurred to earn 'other income.' However, the Tribunal found that 'other income' was earned in the course of business and should be included in the net profit ratio. This inclusion affects the effective rate of tax in Ghana, which the AO initially computed at 21.55%. The Tribunal recalculated it to be 20.61% by including 'other income'.

Issue 3: Doubly Taxed Income
The assessee argued that the entire gross receipt from Ghana should be considered doubly taxed income. However, the Tribunal held that only the net income, after deducting expenses, should be considered. The AO's method of applying the net profit ratio of total income in India to Ghana receipts was accepted, provided 'other income' is included in the net profit ratio.

Conclusion:
The Tribunal directed the AO to recompute the deduction under Section 91 by including surcharge and education cess in the effective Indian rate of tax (20.01%) and including 'other income' in the net profit ratio for Ghana receipts. This adjustment resulted in a revised allowable deduction of Rs.1,02,30,909. The appeal was partially allowed, and the AO was instructed to recompute the income accordingly.

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