AMBICA MILLS LIMITED Vs. COMMISSIONER SURTAX

JUDGEMENT

(1.) THE Tribunal, Ahmedabad Bench has referred for the opinion of the High Court the following questions under the provisions of s. 18 of the Companies (Profits) Surtax Act, 1964 (hereinafter referred to as "the Act") r/w s. 256(1) of the IT Act, 1961 :

(2.) THE assessee-company was assessed under the provisions of the Act for asst. yr. 1977-78 and chargeable profits were computed after giving deduction for income-tax without reducing to the extent of deposit in IDBI, payable thereon. THE chargeable profits under surtax ultimately came to be computed at Rs. 27,681 under order dt. 18th Feb., 1981 of the ITO. Subsequently, the ITO passed the rectification order under s. 13 of the Act on 14th May, 1982 withdrawing the reduction allowed earlier in computing the chargeable profits by a sum of Rs. 9,23,283 which represents the amount deposited in the IDBI under the Companies' Deposits (Surcharge on Income-tax) Scheme, 1976. As per the provisions of s. 2(8) of the Finance Act, 1976, the surcharge on income-tax payable by the company in a case where the amount of deposit made with the IDBI was equal to or exceeded the amount of surcharge on income-tax payable by it was to be "nil". In a case where the amount of deposit so made fell short of the amount of surcharge on income-tax payable on it, the surcharge on income-tax was to be reduced by the amount of deposit. THE assessee-company having deposited the amount of Rs. 9,23,283 being equal to the amount of surcharge on income-tax payable by it, did not therefore, pay the surcharge. THE assessee-company had claimed full deduction for income-tax as well as gross amount of surcharge payable (as if no deposit was made) thereon for the purpose of computing chargeable profits under the Act. THE order of rectification dt. 14th May, 1982 made under s. 13 of the Act withdrawing the said reduction allowed earlier in computing the chargeable profits was challenged before the CIT(A), who held that the deposit made under the said scheme to avoid payment of surcharge, was not allowable as reduction under r. 2(i) of the First Schedule to the Act. Against the order dismissing the appeal, the assessee approached the Tribunal and the Tribunal rejected the assessee's claim and confirmed the order of the lower authorities on the ground that actual liability for surcharge was reduced on account of deposit with the IDBI.

(3.) SEC. 2(8) of the Finance Act, 1976 which is relevant in the present context reads as follows :