Interest-tax deduction survives surtax computation where the special statutory allowance overrides the general income-tax base.

Interest-tax deducted under section 18 of the Interest-tax Act, 1974, while computing total income under the Income-tax Act, 1961, could not be added back for surtax purposes. Chargeable profits under the Companies (Profits) Surtax Act, 1964, are derived from total income computed under the Income-tax Act and adjusted only in the manner set out in the First Schedule. The later special non obstante deduction under section 18 was held to override the general income-tax computation scheme, and the deduction was not lost merely because it was not separately repeated in the Surtax Act. The revisionary order requiring exclusion of the deduction was cancelled, and the appeals were allowed.

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Issues: Whether interest-tax deducted under section 18 of the Interest-tax Act, 1974, while computing the assessee's total income under the Income-tax Act, 1961, had to be added back for the purpose of computing chargeable profits under the Companies (Profits) Surtax Act, 1964.

Analysis: The chargeable profits under the Surtax Act are worked out from the total income computed under the Income-tax Act and adjusted only as provided in the First Schedule. The deduction of interest-tax is expressly granted by section 18 of the Interest-tax Act through a non obstante clause, and that special later enactment overrides the general provisions of the Income-tax Act. The statutory scheme did not justify withdrawing that deduction merely because it was not independently allowed under the Income-tax Act or expressly repeated in the Surtax Act. The total income computed under the Income-tax Act remained the relevant base, and the deduction allowed under section 18 could not be ignored for surtax purposes.

Conclusion: The revisionary order directing exclusion of the interest-tax deduction was not justified and was cancelled. The appeals were allowed.

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