COMMISSIONER OF SURTAX Vs. AMBICA MILLS LTD

JUDGEMENT

(1.) AT the instance of the Revenue, the Tribunal, Ahmedabad Bench "B", has referred for the opinion of this Court the following question under s. 18 of the Companies (Profits) Surtax Act, 1964 r/w s. 256(1) of the IT Act, 1961 :

(2.) AT the time of hearing of this reference, it is admitted that the aforesaid question is concluded by the decision of the Supreme Court in the case of Second ITO vs. Stump Schuele and Somappa P. Ltd. (1991) 94 CTR (SC) 160 : (1991) 187 ITR 108 (SC). In the said judgment the Supreme Court has observed that there is a preponderance of judicial opinion in favour of the assessee and has approved the interpretation given by the various High Courts including the Karnataka High Court in that case and the Gujarat High Court in the case of CIT vs. Alembic Chemical Works Co. Ltd. (1982) 133 ITR 578 (Guj). After discussing in detail the contentions raised by the parties, this Court in the case of Alembic Chemical Works Co. Ltd. (supra) had observed that any income-- falling under Chapter VI-A of the IT Act --since that Chapter deals with deductions is includible, that is, is capable of being included in the total income but by virtue of the special provisions relating to deductions in Chapter VI-A, is taken out and excluded from the total income computed in accordance with the provisions of the IT Act. The Court further observed that deductions allowed to the assessee under Chapter VI-A of the IT Act are not income, profits and gains not includible in the total income as contemplated by r. 4 of Schedule II of the Surtax Act. Such deductions are not to be taken for the proportionate reduction of the capital of the company computed under rr. 1 to 3 of the Rules. In view of the aforesaid decision, the question referred to us is answered in the affirmative in favour of the assessee and against the Revenue. Reference stands disposed of accordingly with no order as to costs.