GOODWILL INDIA LIMITED Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) IN respect of the asst. yrs. 1972 -73 to 1974 -75, the Tribunal, under S. 256(1) of the Act, has referred the following two questions to this Court :

(2.) BRIEFLY stated, the facts of the case, as found by the Tribunal, are as follows : The reference applications pertain to the asst. yrs. 1972 -73 to 1974 -75. The facts briefly are that by application under S. 154 dt. 1st Nov., 1970, the assessee had claimed deduction of the surtax paid, amounting to Rs. 74,791 for the asst. year 1972 -73, Rs. 1,13,303 for the asst. year 1973 -74 and Rs. 68,641 for the asst. year 1974 -75 in the computation of the assessable income of the assessee -company. The ITO rejected the claim of the assessee for two reasons. Firstly, it was held that no mistake apparent from the record had arisen since no claim had been made by the assessee for deduction of the surtax paid in the return of income. Secondly, it was held that S. 40 (a)(ii) of the IT Act, 1961, specifically prohibited deduction of such an amount in the computation of income from business or profession. The ITO also noticed that the assessee had claimed deduction on the basis of the judgment of the Tribunal, Bombay, dt. 24th Feb., 1975, in ITA No. 3068 (Bom) of 1972 -73, but the same had been reconsidered and reversed by the Special Bench of the Bombay Tribunal in the case of M/s Amar Dye Chemical Ltd. vs. ITO (order dt. 1st Dec., 1977 in ITA No. 3643 (Bom) of 1974 -75 pertaining to the asst. year 1970 -71 ).

(3.) THE assessee appealed to the learned CIT (Appeals). He, however, upheld the action of the ITO. Thereupon the assessee came up in second appeal to the Tribunal. The Tribunal upheld the order of the learned CIT (Appeals) for two reasons: in the first place it was held that the question of deduction of surtax liability in the computation of income from business or profession was a highly debatable issue and, therefore, it could not be the subject -matter of rectification under S. 154. Secondly, even on merits, the Tribunal held that the claim of the assessee was rightly rejected by the ITO and by the learned CIT (Appeals ) on the basis of the decision of the Special Bench, Tribunal, in the case of M/s Amar Dye Chemical Ltd. wherein it was held that surtax paid could not be deducted while computing the income from business.