1981 (11) TMI 1

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....tal income for income-tax assessment and that, therefore, the capital should not be reduced by the amounts referable to such deduction under rule 4 of the Second Schedule to the Companies (Profits) Surtax Act, 1964? " The answer to this question is covered by a decision of this court in Addl. CIT v. Bimetal Bearings Ltd. [1977] 110 ITR 131 (Mad). Following that decision, we answer the question in the affirmative and against the Revenue. The second question for our opinion is in the following terms: " 2. Whether, on the facts and in the circumstances of the case and having regard to the proviso to section 2(8) of the Companies (Profits) Surtax Act, 1964, the Appellate Tribunal was right in holding that the standard deduction should ....

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..... shall be increased or decreased proportionately. " In the present case, as already mentioned, for the assessment year 1971-72, the company did not have a full one year as its previous year by reason of the supervening amalgamation on December 24, 1970. As already mentioned, the accounting period relevant to the assessment year 1971-72 extended only for a period of 8 months and 24 days. Under the proviso to section 2(8), therefore, the statutory deduction must be correspondingly reduced on a time basis in the same proportion as the actual accounting period bears to the whole period of twelve months of a year. The Income-tax Officer accordingly reduced the statutory percentage so as to accord with the accounting period being 8 months and....