Recomputation of chargeable profits under super profits tax can proceed despite final income-tax assessment

Finality of an income-tax assessment did not, by itself, prevent recomputation of total income for determining chargeable profits under the Super Profits Tax Act, 1963. The court held that section 2(5), read with section 7, permitted the assessing authority to make a fresh computation where necessary, and an earlier income-tax computation was not immutable merely because the assessment had become final. An erroneous or mistaken computation could therefore be revised for super profits tax purposes. The assessee's deduction claim was not decided on merits and remained open for determination in the appropriate proceedings.

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Issues: Whether the finality of the income-tax assessment prevented recomputation of total income for determining chargeable profits under the Super Profits Tax Act, 1963, and whether the assessee's deduction claim could be rejected solely on that basis.

Analysis: The definition of chargeable profits in section 2(5) of the Super Profits Tax Act, 1963, was held not to confine the assessing authority to the income-tax assessment as already made, if a fresh computation became necessary. The scheme of section 7 showed that the officer under the Super Profits Tax Act could determine chargeable profits on the basis of a computation under the Income-tax Act, and that computation was not to be treated as immutable merely because the earlier income-tax assessment had become final. The Court held that an erroneous or mistaken income-tax computation could be recomputed for super profits tax purposes when justified. As the Tribunal had not examined the deduction claim on merits, that question was left for determination in proceedings under section 19 of the Super Profits Tax Act, 1963, read with section 260 of the Income-tax Act, 1961.

Conclusion: The assessee's contention that finality of the income-tax assessment did not bar recomputation under the Super Profits Tax Act was accepted, and the reference was answered in favour of the assessee, while the merits of the deduction claim remained open before the Tribunal.

Ratio Decidendi: For purposes of super profits tax, chargeable profits may be recomputed independently where necessary, and the finality of an income-tax assessment does not by itself preclude such recomputation.

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