2008 (3) TMI 308

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....ibunal is right in law in cancelling the order of the Commissioner of Income-tax passed under section 16 of the Companies (Profits) Surtax Act holding that rule 2 of the Second Schedule to the Act cannot be applied on the facts of this case?" 2. The facts of the case are : The assessee is a public limited company. Its surtax assessment for the assessment year 1980-81 for the previous year ended June 30, 1979, was completed under section 6(2) on September 29, 1984, on a chargeable profits of Rs. 4,81,169. The Commissioner of Income-tax called for the records of the case and found that while computing the capital, the provisions of rule 2 of the Second Schedule had not been applied by the Assessing Officer, even though the investments as o....

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....ns by reducing from the capital the net cost of the shares owned by the assessee and thereby reduce the standard deduction, and in accordance with law. 3. The Tribunal considered the arguments advanced by the assessee that the Madras High Court in Additional CIT v. Madras Motor and General Insurance Co. Ltd. [1979] 117 ITR 354 had clearly held that : "Where an assessee had no income whatsoever falling under clause (viii) of rule 1 of the First Schedule, the value of assets which would have given rise to such income should not be deducted from the capital base for computing the statutory deductions". The Tribunal noted that during the previous year relevant to the assessment year 1980-81 the assessee had no income in the nature of dividen....

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.... with rule 1 of the First schedule to the Act. From the chargeable profits, the statutory deductions have to be made and it is only the excess of the chargeable pro-fits over the statutory deductions that are brought to tax. The proper interpretation to be placed on the First and the Second Schedules to the Surtax Act including rule 2 of the Second Schedule, is to understand rule 2 of the Second Schedule as attracting cases where rule 1 of the First Schedule is attracted. In other words, if there is no income of the kind mentioned in clauses (iii), (vi), and (viii) of rule 1 of the First Schedule in a particular assessment year, rule 2 of the Second Schedule will not be attracted at all. By virtue of rule 1(viii) of the First Schedule....