HINDUSTAN INSECTICIDES LIMITED Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE Tribunal, Delhi Bench "D", referred, under S. 256(1) of the INCOME TAX ACT, 1961, r/w S. 18 of the Companies (Profits) Surtax Act, 1964, the following question for the decision of this Court :

(2.) THE facts of the case are brief. The Government of India entered into an agreement with UNICEF and WHO, Agencies of the United Nations Organisation, whereby the Government of India was to receive free of cost plant and machinery and free technical assistance for manufacture of DDT in India. Pursuant thereto, the Government of India incorporated a joint stock company under the name and style of Hindustan Insecticides Limited, the assessee herein. The plant and machinery received by the Government of India was allowed to be used by the assessee with a direction that the assessee will discharge the obligations of the Government of India under the agreement. The matter as to how the plant and machinery should be capitalised in the balance sheet was raised by the assessee. By letter dt. 5th Dec., 1957, the assessee was informed of the Government decision in this regard. This was :

(3.) THE Act, by S. 4, imposes a levy of surtax on the amount of the chargeable profits of a company of the previous year as exceed the statutory deduction. The statutory deduction is ten per cent. of the capital of the company or Rs. 2 lakhs, whichever is greater. The chargeable profits have to be computed in accordance with the provisions of the First Schedule and the capital in accordance with those of the Second Schedule. We are here concerned with the Second Schedule, the relevant provisions of which may be first set out.