Calcutta High Court
Commissioner Of Income Tax vs Universal Trading Co. Ltd. on 28 August, 1989
Equivalent citations: (1992)102CTR(CAL)59
Author: Suhas Chandra Sen
Bench: Suhas Chandra Sen
JUDGMENT
SUHAS CHANDRA SEN, J. :
The Tribunal has referred the following two questions of law of this Court under s. 256(1) of the IT Act, 1961, read with s. 18 of the Companies (Profits) Surtax Act, 1964.
"(1) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that for the purpose of computation of chargeable profits under the Companies (Profits) Surtax Act, 1964 the amount of gross dividend should be excluded as per provisions of r. 1(viii) of the 1st Schedule instead of the net amount of dividend ?
(2) Whether on the facts and in the circumstances of the case, the Tribunal was justified in holding that in computing the chargeable profits the loss on account should not be excluded and further that the gross dividend of Rs. 74,750 should be excluded from the total income in computing the chargeable profits under Companies (Profits) Surtax Act, 1964 ?"
2. The assessment years involved in this reference are the asst. yrs. 1973-74 and 1974-75, for which the relevant period of account is the year ended on 31st March, 1973 and 31st March 1974, respectively.
3. So far as the question No. 1, relating to asst. yr. 1973-74 is concerned, in view of the judgment given by this Court on 1st August, 1989 in IT Ref. No. 4 of 1981 (CIT vs. Hindusthan Gum & Chemicals Ltd. (1990) 182 ITR 396 Cal) this question must be answered in the negative and against the assessee.
4. So far as the second question is concerned, finding of facts as recorded by the Tribunal are as under :
The assessee claimed deduction of Rs. 23,913 as per provisions of r. 1(viii) of the 1st Schedule. However, as per IT records for this year income by way of dividend was determined at a loss figure of Rs. 2,89,750. The loss figure was arrived at after deducting expenses incurred by the assessee for earning dividend income, from the gross dividend received by the assessee at Rs. 74,750. The ITO observed that as per IT assessment order the assessee was entitled to any relief in respect of income by way of dividend as per provisions of r. 1(viii) of the Companies (Profits) Surtax Act, 1964. Assessees claim of deduction of dividend income earned during the year was, therefore, rejected by the ITO. On the other hand, income by way of dividend as per IT assessment order stood at a loss figure of Rs. 2,89,750. It was excluded by the ITO while computing the chargeable profits, under the Companies (Profits) Surtax Act, 1964. He therefore, held that the loss determined under the head Income from dividend would have to be excluded. The assessee moved the CIT(A) contending that the chargeable profit was to be computed as per the provisions of the Surtax Act and no adjustment other than which was admissible by the provisions of the 1st Schedule could be made and that the Explanation as per r. 1(viii) should be gross dividend of Rs. 74,750 as against adding back of the negative figure determined in the assessment. The CIT(A) was convinced with regard to the above contention and allowed the appeals.
5. On further appeal, the Tribunal following the adjustment in the case of Geoffrey Manners & Co. Ltd. reported in Selected Orders of the Income-tax Appellate Tribunal, Vol. II, page 625, affirmed the decision of the CIT(A).
6. On behalf of the Revenue, it has been contended that the ITO has given good reasons for disallowing the claim of the assessee.
7. Sec. 2(5) of the Companies (Profits) Surtax Act, 1964 is as follows :
"2(5) Chargeable profits means the total income of an assessee computed under the IT Act, 1961 (XLIII of 1961), for any previous year to years, as the case may be, and adjusted in accordance with the provisions of the First Schedule."
8. Therefore, the starting point in computation of the chargeable profits must be the assessed income of an assessee, assessed under the IT Act, 1961 for the relevant previous year. For the computation of chargeable profits, the ITO has himself taken the figure of the total income as per assessment order dt. 1st July, 1977 at Rs. 21,74,558. Adjustments can only be made on the basis of the rules laid down in the First Schedule to the Companies (Profits) Surtax Act, 1964. The relevant rule is r. 1(viii), which reads as follows :
"1. Income, profits and gains and other sums falling within the following clauses shall be excluded from such total income, namely :
xxxxx xxxxx xxxxx
(viii) income by way of dividends from an Indian company or a company which had made prescribed arrangements for the declaration and payment of dividends within India,".
9. Therefore, the amounts that have entered into the computation of total income shall be excluded from "such total income" of the sums fall within the specified clauses. In the instant case, the dividend income was computed to be a loss in the assessment order and the net loss was included in the total income assessed under the IT Act. The assessment of chargeable profits must be made in accordance with the First Schedule of the Companies (Profits) Surtax Act, 1964. So income by way of dividends which had been assessed for computation of total income had to be excluded from "such total income" under sub-r. (viii) of r. 1 of the First Schedule to the Act.
10. Mr. Mitra, appearing for the Revenue has submitted that the argument advanced by the assessee in this reference was not raised before the Tribunal. From the findings of the Tribunal. It is a pure question of law. It is well settled that if the question itself is in issue then every aspect of the question need not be made subject-matter of a separate and independent question. Moreover, the CIT(A) held in favour of the assessee and the Deptt. had gone in appeal before the Tribunal and the Deptt. contended before the Tribunal that the Commissioner was not justified in holding that in computing the chargeable profits, the loss on account of dividend included in the total income as per income-tax should not be excluded. The Tribunal has recorded this contention of the Revenue and has now referred this question. Therefore, the contention of Mr. Mitra is of no substance.
11. In view of the aforesaid, the questions raised in this reference are answered as follows :
Question No. 1 is answered in the negative and against the assessee.
Question No. 2 is really in two parts. The first part is "whether on the facts and in the circumstances of the case, the Tribunal was justified in holding that in computing the chargeable profits, the loss on account of dividend included in the total income as per income-tax assessment should not be excluded" and the second part is "whether the gross dividend of Rs. 74,750 should be excluded from the total income in computing the chargeable profits under the Companies (Profits) Surtax Act, 1964 ?"
12. The first part of the second question is answered in the affirmative and in favour of the assessee. In view of the answer given in the first part of the question, second part need not be answered.
13. The reference is disposed of finally as above.
There will be no order as to costs.
BHAGABATI PRASAD BANERJEE, J. :
I agree.