Surtax deductible in distributable income computation where a specific surtax provision overrides the general income-tax approach.

Surtax payable by a company was deductible in computing distributable income for the purpose of section 104 of the Income-tax Act, because section 109 had to be read with section 15 of the Companies (Profits) Surtax Act, 1964, which expressly directed deduction of surtax in that computation. Authorities relied on by the Revenue concerned deduction of surtax under section 37 in computing total income and did not override the specific statutory rule governing distributable income. The specific provision in the surtax law therefore prevailed over the general treatment adopted in assessment, with the result that the addition under section 104 could not be sustained.

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Issues: Whether surtax payable by the assessee company was deductible while computing distributable income for the purposes of section 104 of the Income-tax Act, 1961.

Analysis: The provisions governing distributable income under section 109 of the Income-tax Act, 1961 had to be read with section 15 of the Companies (Profits) Surtax Act, 1964, which specifically directed that surtax payable by a company shall be deductible in computing distributable income. The authorities relied on by the Revenue dealt with deduction of surtax in computation of total income under section 37, but did not displace the specific statutory direction applicable to computation under sections 104 to 109. The specific provision in the surtax law therefore prevailed over the general approach adopted in the assessment.

Conclusion: Surtax was deductible in computing distributable income, and the addition made under section 104 could not be sustained; the assessee succeeded.

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