TaxTMI 
TaxTMI 
TaxTMI 
1982 (11) TMI 59
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....payment of surcharge as envisaged under section 2(8) of the Finance Act, 1976. Both the STO and the Commissioner (Appeals) rejected the claim holding that for the purpose of computing the chargeable profits the income-tax including surcharge to be deducted is the net amount of income-tax determined as payable. 2. The appeal came up before a Division Bench of the Tribunal. The orders passed by different Benches of the Tribunal were produced by the parties to show that different Benches had taken conflicting views on the issue. Reference was made to the President for constituting a Special Bench. The proposal was accepted and hence this appeal before the Special Bench. 3. Arguments were advanced at great length. Reference was made to the relevant provisions of the Finance Acts, 1976 and 1977, rule 2(i) of the First Schedule to the Act, Notes on Clauses, the decisions of the Supreme Court in the cases of CIT v. S.A.S. Marimuthu Nadar [1962] 44 ITR 1, R.B. Jodha Mal Kuthiala v. CIT [1971] 82 ITR 570, CIT v. T.V. Sundaram Iyengar & Sons (P.) Ltd. [1975] 101 ITR 764 and Smt. Tarulata Shyam v. CIT [1977] 108 ITR 345, the decision of the Gujarat High Court in the case of Addl. CIT v. Rus....
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....red by the expressions 'relief', 'rebate' or 'deduction' in respect of income-tax contemplated under rule 2(i) or whether it is a payment of surcharge itself. For this purpose it becomes necessary to refer to the provisions of section 2(8) of the Finance Act, 1976, which reads as under : "(8) Where an assessee, being a company, makes, during the financial year commencing on the 1st day of April, 1976, any deposit with the Industrial Development Bank of India established under the Industrial Development Bank of India Act, 1964 (18 of 1964), under any such scheme as the Central Government may, by notification in the Official Gazette, frame in this behalf, then, the surcharge on income-tax payable by the company for the assessment year commencing on the 1st day of April, 1977,--- (i) in a case where the amount of deposit so made is equal to or exceeds the amount of surcharge on income-tax payable by it, shall be nil ; and (ii) in a case where the amount of the deposit so made falls short of the amount of surcharge on income-tax payable by it, shall be reduced by the amount of the deposit." Corresponding provisions are found in section 2(1) of the Finance (No. 2) Act, 1977. As thos....
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.... are the same as those specified in Paragraph F of Part I of the First Schedule to the Bill. It has further been provided that a company may, in lieu of payment of surcharge on income-tax at the specified rate, make, before the last instalment of advance tax is due in its case, a deposit with the Industrial Development Bank of India under a scheme to be framed by the Central Government in this behalf, and if it does so, the amount of surcharge payable by it shall be reduced by the amount of the deposit. Where a company makes a deposit during the financial year 1976-77 under the scheme, the surcharge on income-tax payable by it for the assessment year 1977-78 will also be reduced by the amount of the deposit so made." MEMORANDUM EXPLAINING THE PROVISIONS IN THE FINANCE BILL, 1976, PAGE 181 "It has, however, been provided that a company may, in lieu of payment of surcharge on income-tax at the specified rates, make, before the last instalment of advance tax is due in its case, a deposit with the Industrial Development Bank of India under a scheme to be framed by the Central Government in this behalf, and if it does so, the amount of surcharge payable by it shall be reduced by the a....
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....taking back of the relief. As regards the assessee's contention that non-treatment of the deposit as payment of surcharge liability will result in the increase of the assessee's chargeable profits, it will no doubt be so. The consequence will be that the amount of the deposit, i.e., Rs. 22,100, will form part of the chargeable profits. Assuming that the assessee is liable to surtax eventually, the rate of surtax will be 25 per cent or 40 per cent as the case may be. This is as against outright loss if the assessee had paid the surcharge and not made the deposit as above. Moreover, the assessee also gets interest on the deposit. It is, therefore, not possible to accept that it is a case of giving relief by one hand and taking it back by the other. 8. The learned counsel also placed reliance on the decision of the Supreme Court in the case of Marimuthu Nadar in support of the proposition that provisions of this nature should be interpreted to advance the purpose for which these are enacted. We, however, find that the question involved in that case was whether the earned income relief was available to the assessee on the income of his wife and minor child clubbed with his income unde....