COMMISSIONER OF INCOME TAX Vs. BALLARPUR INDUSTRIES LIMITED

JUDGEMENT

(1.) IN this reference the following question of law has been referred at the instance of the Commissioner of Surtax, Vidarbha and Marathwada, Nagpur, for our consideration :

(2.) THE assessee before us is Ballarpur Industries Ltd., previously known as Ballarpur Paper and Straw Board Mills Ltd., Ballarpur. We are concerned with their liability to surtax for the assessment year 1971 -72. The chargeable period for the said assessment was the year ended 30th June, 1970, and the capital for the purpose of determining the standard deduction was thus required to be determined as on 1st July, 1969. The assessee had initially filed the return and thereafter revised the same. In its return the assessee in working out the capital base as on 1st July, 1969, did not make any adjustment for the relief admissible to it as deduction under s. 80 -I of the I.T. Act, 1961. The ITO was of the view that having regard to r. 4 of the Second Schedule of the Companies (Profits) Surtax Act, 1964, the amount proportionate to the deduction allowable under s. 80 -I could not form part of the capital base for arriving at the standard deduction at 10% therefore. The ITO, therefore, worked out the amount of deduction admissible under s. 80 -I and deducted the amount so worked out from the capital of the company as shown by the assessee. Being aggrieved by the order of the ITO reducing the capital by the amount proportionate to the deduction admissible under s. 80 -I of the I.T. Act, 1961, the assessee preferred an appeal before the AAC. The AAC confirmed the approach and action of the ITO reducing the capital of the company in proportion to the amount of deduction admissible under s. 80 -I. Being aggrieved, the assessee carried the matter in further appeal to the Tribunal. The Tribunal considered the language of r. 4 and, fortified by the decision of a single judge of the Karnataka High Court in Stumpp Schuele and Somappa P. Ltd. v. Second ITO : [1976]102ITR320(KAR) , accepted the contention of the assessee and allowed the appeal, directing that the amount of deduction permissible by reason of the provision contained in s. 80 -I should not be deducted in determining the amount of capital of the assessee -company on the relevant date. It is this conclusion of the Tribunal which has been assailed by the Commissioner in this reference.

(3.) IN considering and applying the provisions of r. 4 we are concerned with what part of the income of the assessee can be regarded as 'not includible in its total income as computed under the I.T. Act' ? On behalf of the assessee it has been submitted that incomes which do not form part of its total income as indicated in Chap. III of the Act alone would be covered by this provision and not the deductions allowed to the assessee under Chap. VIA.