1991 (4) TMI 61

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.... The assessment year is 1977-78. The assessee, instead of paying the surcharge on income-tax under the provisions of the Companies (Profits) Surtax Act, 1964 ("the Act" for short), deposited the equivalent amount with the Industrial Development Bank of India as provided in the relevant scheme prepared under the provisions of the Finance Act, 1976. The assessee required this deposit to be treated as payment of surcharge for the purpose of computing the chargeable profits under the provisions of the Surtax Act. The Income-tax Officer allowed the claim of the assessee but the Commissioner of Income-tax revised this order and the Appellate Tribunal has affirmed the order of the Commissioner. The Appellate Tribunal followed the decision of it....

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....e deposit with the Industrial Development Bank of India cannot be equated to the payment of tax because the tax is appropriated by the State for its purposes and forms part of its funds, while the deposit with the Industrial Development Bank of India is repayable to the assessee after five years and the said deposit carries interest at the rate of 6% per annum. The proviso to section 2(6) of the Finance Act, 1976, referred to above, gives an option to the assessee either to pay the surcharge or make the deposit. It was contended by learned counsel for the Revenue that the term "in lieu thereof" does not convey the meaning of being equivalent to, but creates an option in the assessee either to make the payment or to make the deposit. The lia....

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....s not the same as payment of the tax, which is one aspect. Another facet of interpretation is to understand the word "payable" in rule 2 in the context of the second proviso to section 2(6) of the Finance Act. The said proviso states that, in lieu of payment of surcharge ... deposit may be made under the scheme. In other words, instead of the tax being paid, the amount could be deposited. The deposit results in removing the liability to make the payment. In other words, on the deposit being made, the tax ceases to be "payable". The language of rule 2 of the First Schedule to the Surtax Act also requires that the tax "payable" by the company is to be reduced from the total income. If the tax is not payable, then the said amount cannot go in ....