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A reading of the above provision makes it evident that its operation is confined to the computation of the distributable income of a company for the purposes of Chapter XI-D of the Income-tax Act. It cannot be extended to any other chapter or provision in the Act.
The learned counsel for the appellants placed strong reliance upon the decision of this Court in Jaipuria Samla Amalgamated Collieries Ltd. v.. commissioner of Income-Tax. West Bengal, (82 I.T.R. 580) to contend that a tax has to be computed in accordance with the provisions of Income-tax Act to fall within the mischief of Section 40(a)(ii). Inasmuch as the surtax is computed on a basis different from the basis prescribed in the Income-tax Act, it is contended, it cannot fall within the four corners of Section 40(a)(ii). It is not possible to agree with this contention either. The said decision was rendered with reference to sub-section (4) of Section 10 of the Indian Income-tax Act, 1922 which corresponds to sub-clause (ii) of clause (a) of Section 40 of the present Act. The question therein was whether the amount payable as (i) road and public works cess levied under the Bengal Cess Act, 1880 and (ii) the education cess levied under the Bengal (Rural) Primary Eduction Act, 1930 fall within the mischief of Section 10(4). This Court held that they do not. A perusal of the decision shows that the road and public works cess was levied on immovable property to provide for construction and maintenance of roads and other works of public utility. Under Section 5 of the Act (Bengal Cess Act, 1880) all immoveable property, with certain exceptions, was subjected to payment of road cess and public works cess. Section 6 provided that the said cesses shall be assessed on the annual value of lands and, until provision to the contrary was made by Parliament, on the annual net profits from mines, quarries, tramways, railways and other immovable property at such rates as were to be determined in the manner prescribed. Similarly the education cess was also levied under Section 29 of the Bengal (Rural) Primary Education Act, 1930, on immovable property on which the road and public works cesses were assessed. The rate at which the education cess was to be levied depended upon the character of the property; in respect of miner and quarries, it was leviable at the rate of three and a half pice on each rupee of annual net profits. It is thus abundantly clear that the levy of aforesaid cesses was upon the immovable properties and not on profits. It is no doubt true that the tax was measured with reference to the net profits of decisions but it is well-settled by a series of decisions of this Court that the measure by which a tax is computed does not determine the character of the tax vide union of India vs. Bombay Tyre International.(A.I.R 1994 S.C.420) and Goodricke Tea Company v. State of West Bengal,(1995 (1) suppl.S.C.C.707).It is, therefore idle to contend that the said decision helps the assessees' case in any manner. The cesses considered in the said decision were not taxes "levied on the profits or gains of any business or profession or assessed at a proportion of or otherwise on the basis of any such profits or gains"

within the meaning of Section 40(a)(ii) as explained hereinabove. The learned counsel, however, relied upon the following observations in the said decision: "the words "profits and gains of any businesss profession or vocation"

which are employed in section 10(4) cans, in the context, have reference only to profits or gains as determined under section 10 and cannot cover the net profits or gains arrived at or determined in a manner other than that provided by section 10. The whole purpose of enacting sub-section (4) of section 10 appears to be to exclude from the permissible deductions under clause (ix) and (xv) of sub-section (2) such cesss, rate or tax which is levied on the profits or gains of any business, profession or vocation or is assessed at a proportion or on the basis of such profits or gains. In other words, sub- section (4) was meant to exclude a tax or a cess or rate the assessment of which would follow the determination or assessment of profits or gains of any business, profession or vocation in accordance with the provisions of section 10 of the Act.... These profits arrived at according to the provisions of the two Cess Acts can by no stretch of reasoning be equated to the profits which are determined under section 10 of the Act. It is not possible to see, therefore, how section 10(4) could be applicable at all in the present case." The learned counsel pointed out that this Court has in the said decision approved the decision of the Privy Council in Commissioner of Income-tax vs. Gurupada Dutta, (14 I.T.R.100) and has further observed that the Parliament must be deemed to have accepted the view taken by the Privy Council by not changing the language of the relevant provision in the 1961 Act [Section 40(a)(ii)].