Deposit during the relevant financial year entitled the company to surcharge set-off under the 1976 scheme.

A company depositing funds with IDBI under the Companies Deposits (Surcharge on Income-tax) Scheme, 1976 during the relevant financial year could set off that deposit against surcharge for assessment year 1977-78. The Finance Act and the applicable Board circular both treated any deposit made during financial year 1976-77 as reducing the surcharge liability for that assessment year. Because the assessee's deposit was made within that financial year, the timing objection raised by the lower authorities failed, and the disallowance of the set-off was incorrect.

---

---

Issues: Whether the assessee-company was entitled to set off the deposit of Rs. 15 lakhs made on 15-12-1976 under the Companies Deposits (Surcharge on Income-tax) Scheme, 1976, against the surcharge payable for assessment year 1977-78.

Analysis: The relevant Finance Act for assessment year 1977-78 provided that where a company made a deposit during the financial year 1976-77 with the IDBI under the notified scheme, the amount so deposited was to be adjusted against the surcharge payable. The Board's circular likewise stated that a deposit made at any time during the financial year 1976-77 would reduce the surcharge liability for assessment year 1977-78. Since the assessee's deposit was admittedly made within that financial year, the timing objection taken by the lower authorities was not sustainable.

Conclusion: The assessee was entitled to the benefit of set off of the deposit against the surcharge payable, and the disallowance was incorrect.

Ratio Decidendi: Where the governing Finance Act and the applicable circular allow a company to reduce surcharge liability by a deposit made during the relevant financial year, the benefit cannot be denied on the ground that the deposit was not made before an earlier due date within that year.

---