Indian Kanoon - Search engine for Indian Law

(7) The aforesaid question has come up for consideration before different High Courts in a number of cases. Except for the two decisions of the Gauhati High Court, every other High Court has come to the conclusion that the Sur-tax computed is not an allowable deduction under Section 37 of the Act and. some of the other High Courts have held that the tax so paid also comes within the ambit of Section 40(a)(ii).

(8) The contention of Shri Bishamber Lal, learned counsel for the assessed is that except for the Gauhati High Court, the A either decisions do north lay down the correct law. Strong reliance is placed by him on a decision of the Supreme Court in the case of Jaipuria Samla Amalgamated Collieries Ltd. v. Commissioner of Income-tax, 82 Itr 580(4). In that case Casks were helved on owners of mines on the average of annual net profits of last three years. A question arose whether the amounts so paid were allowable as a deduction. The Supreme Court, in that case, had an occasion to construe the provisions of Section 10(4) of the Income-tax Act, 1h922, which was in pan malaria to Section 49(a)(ii) of the 1961 Acthaiu' it came to the conclusion that the words "profits and gains of any business, profession or vocation" of concurring in Section 10(4) can have reference only to profits afghan gains as determine-I under Section 10 of the 1922 Act. The Cess was leviable under the Respective statutes on the annual net profit and not on the profits and gains as computed under the Income-tax Act and, therefore, the provisions of Section 10(4) were held to be not (9) The decision in Jaipuria Samla's case (supra) can Oc to little assistance to the learned counsel for the .issesse's, and is clearly distinguishable. Firstly what the assessed ww required to pay turn carrying on the business of raising coal from coal Mews and selling it, was road and public works cess as well as education cess. The payment of these cesses was compulsory but the calculation thereof was relatable to the annual net profit of the assessed. The Supreme Court did not have occasion to consider the question as to whether the said amount was allowable as a deduction under Section 10(2)(xv) as it was assumed that the same would be regarded as a business expenditure, because this question was not raised, in the pre- sent case, as we shall see, (he expenditure in question, ^s not allowable as a deduction under Section 37. Secondly, whereas the Cesses in Jaipuria Samla's case were not relatable to Act. Income-tax the under computed as prophets to relatable clearly is 1964 Act, Sur-tax (Profits) Companies of provisions payable which 1922, prov.?sions profit (10) Section 4 of the 1964 Act is a charging section which provides that in respect of every assessment year commencing from 1st April, 1964 Sur-tax will be levied on Chargeable profits of the previous year as exceed the statutory deductio'i which was specified. Chargeable profit? are defined in Section 2(5) of the 1964 Act to mean the total income of an assessed computed under the Income-tax Act, 1961 for any previous year or years, as the case may be and adjusted in accordance with the pretensions of the First Schedule. The First Schedule, inter alia, profited for adjustment to be made to the total income computed in the year under the Income-tax Act while computing the chargeable profirts. The adjustment which is provided is for the exclusion of certain types of incomes, profits and gains and other sums from the total income which is computed under the said Act. Some odf the items which are to be excluded are capital gains, compensation or payment referred to in Section 28(ii) of the Income-tax Act, profits and gains of any business aof life insurance, income referred to in Section 41(2) of the Income-tax Act, income chargeable under the head "interest on securities" of certain kinds, 50 per cent of she deduction allowable under Section 80G cf the Act, income from dividends, income of royalties received from Government or local authorities or any other Indian concern, certain types of income of assdas banking company and amount of any deduction from income-tax chargeable on the total income in connection with the export sof any goods etc. (11) It is clear from the reading of Section 4 along with Section 2(5) and the First Schedule of the 1964 Act that the Sur-tax is sought to be computed primarily on the profits and gains from business of an assessed. The tax is in respect of the assessment year and the chargeable profits ars the total income computed under the Income-tax Act, 1961 bur. adjusted in accordance with the provisions of the First sehedule. There can be a number of cases where the types of incomes and gains referred to in the First Schedule to the said Act may not have accrued or arisen to an assessed and it may still be liable to pay Sur-tax because of its total income computed under the Income-tax Act, 1961 which is regarded as chargeable profits. We have no manner of doubt that the tax which is imposed by the charging Section under the 1964 Act is on the total income computed under the Income-tax Act, 1961, subject to such adjustments as may be necessary under the First Schedule to the Act. This was not the position in Jaipuria Samla's case (supra). There the annual net profits were not to be computed under the provisions of the Income-tax Act but the computation was to take place under the respective Cess Ac's.