TaxTMI 
TaxTMI 
1979 (1) TMI 13
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....e assessment year 1963-64, computed under the I.T. Act, 1961, under the head " Interest on securities ". The question then was of computation of super profits tax, if any, payable by the assessee. In terms of s. 2(5) of the S.P.T. Act, 1963, " chargeable profits " for super profits tax purposes mean the total income as taken for income-tax purposes subject to adjustments in accordance with the First Schedule to the S.P.T. Act, 1963. Rule I of the said First Schedule provides that income, profits and gains and other sums falling within the thirteen clauses to the said Schedule are to be excluded in computing the chargeable profits for super profits tax purposes. It was the assessee's case that its income by way of interest on securities in the amount of Rs. 2,18,802 was to be excluded. The SPT Officer, however, declined to do so without any observation on the point in his assessment order. The French bank carried the matter to the AAC. The AAC upheld the contention of the assessee that the interest on securities received from Government fell within the purview of cl. (x) of r. 1 and was, therefore, liable to be excluded. The AAC, however, took the figure of income from interest on s....
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....reduced not in the sum of Rs. 10, 12,252 but only by that proportion of the interest paid by the assessee which the amount of interest received from Indian concerns bore to the total interest receipts of Rs. 25,19,560. This figure was worked out at Rs. 5,19,804. The proportionate expenses, however, were worked out at Rs. 5,51,207. The AAC thus worked out the net figure of interest to be excluded under cl. (x) of r. 1 at Rs. 2,22,817. The decision of the AAC appears to have been accepted by the assessee and we are informed by Mr. Dastur appearing on its behalf that this was because under the calculations made there was no liability for super profits, tax. The department, however, felt aggrieved and contended that the AAC was wrong on several different counts. The principal grievances of the department were that interest on Govt. securities was not eligible for deduction under Cl. (x) of r. 1. It was further contended that the entire interest paid by the assessee to its depositors and creditors was required to be deducted from the interest earned by the assessee from Indian concerns for the purposes of arriving at the net figure of interest which was deductible under cl. (x) of r.....
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.... security of a State Government issued income-tax free, the income-tax whereon is payable by the State Government; ...... (x) in the case of a non-resident company which has not made the prescribed arrangements for the declaration and payment of dividends within India, its income by way of any interest or fees for rendering technical services received from Government or a local authority or any Indian concern. " Mr. Joshi's submission was that under cl. (vi) of r. 1, there was a specific or special provision for income chargeable under the head " Interest on securities " and the clause provided that only interest received on incometax free securities either of the Central Govt. or the State Govt. were to be excluded under r. 1. It was contended that in view of this special provision interest on securities would be required to be excluded from the meaning to be ascribed to the word " interest " in cl. (x). This would obviously be on the principle that the special excludes the general. Now, in connection with this argument, it is to be noted that the phraseology of cl. (x) of r. I is extremely wide. However, the benefit of cl. (x) is only available to a special category of asse....
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....deals with a totally different situation and cannot be pressed into service for limiting the operation of cl. (x). Reading cl. (x) by itself the two questions referred to us present little difficulty. Interest received by the French bank from the Govt. securities is certainly interest received from the Government. If that is so, and the French bank is accepted to be as it admittedly is a non-resident company which has not made the prescribed arrangements for the declaration and payment of dividends within India, it will be entitled to the benefit of cl. (x) of r. 1. As far as question No. 2 is concerned, the Tribunal appears to be aware of the submission that cl. (x) provides for deduction of the entire interest earned without any reduction either for interest paid by the assessee or by some notional amounts of expenses which might have been considered to have been expended by the assessee in order to earn the interest. As the assessee had not carried the matter in appeal before the Tribunal, the Tribunal refrained from indicating its view on the said submission, but opined merely that the reduction of the amounts of interest made by the AAC appeared to be fair and, therefore, i....