1981 (4) TMI 71

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....x Act, 1964, and should, therefore, be deducted from the cost of investment in shares and only the balance should be deducted from the capital computation under clause (ii) of rule 2 of the Second Schedule to the said Act ? " The assessment year involved is 1965-66. The assessee is a private limited company. In computing the chargeable profits under the Companies (Profits) Surtax Act, 1964, the assessee claimed that the proposed dividend of Rs. 11,55,908 should not be deducted from the capital base as it constituted a surplus fund within the meaning of r. 2 of Sch. II to the aforesaid Act. But the ITO did not allow this claim, without stating any reason in his order. On appeal, the AAC found that exactly a similar claim had been allow....

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....ound support for this view in the order dated 18th September, 1974, of the Tribunal in S.T.A. No. 31 (Cal) of 1973-74. The Tribunal, therefore, upheld the order of the AAC. Now, we are concerned with the expression " surplus " in r. 2 of Sch. II to the C. (P.) S.T. Act, 1964. The material portion of the said provision reads as follows: "2. Where a company owns any assets the income from which in accordance with clause (iii) or clause (vi) or clause (viii) of rule 1 of the First Schedule is required to be excluded from its total income in computing its chargeable profits, the amount of its capital as computed under rule I of this Schedule shall be diminished by the cost to it of the said assets as on the first day of the previous year ....