Surtax computation excludes only sums forming part of the previous year's income, not reserve transfers outside that income.

Paragraph 1(xi)(b) of the First Schedule to the Companies (Profits) Surtax Act, 1964 was construed as permitting exclusion only of sums already forming part of the total income of the previous year. The scheme of the Act distinguishes exclusions under paragraph 1 from deductions under paragraph 2, so the expression "other sums" in paragraph 1(xi)(b) was read in the same genus as "income, profits and gains". On that reading, a transfer to reserve fund not derived from the previous year's income could not be excluded in computing chargeable profits.

---

---

Issues: Whether a sum transferred by a banking company to reserve fund, though not derived from the income of the previous year, could be excluded from the total income under paragraph 1(xi)(b) of the First Schedule to the Companies (Profits) Surtax Act, 1964 for computing chargeable profits.

Analysis: The scheme of the Companies (Profits) Surtax Act, 1964 treats chargeable profits as the total income computed under the Income-tax Act, 1961 as adjusted under the First Schedule. Paragraph 1 of the First Schedule provides for exclusions from the total income computed for the previous year, while paragraph 2 separately deals with deductions after such exclusions. On that structure, the exclusion under paragraph 1 is confined to items already included in the total income of the previous year. The expression "other sums" in paragraph 1(xi)(b) was construed in the same genus as "income, profits and gains", and therefore as referring to sums already forming part of the total income of the previous year. Since the admitted transfer to reserve fund was not out of the income of the previous year, it could not fall within paragraph 1(xi)(b).

Conclusion: The assessee was not entitled to exclude the transferred amount from the total income for surtax computation, and the issue was decided against the assessee and in favour of the Revenue.

---