Law:

Section:

Rule 4 of Schedule II to Companies (Profits) Surtax Act, 1964, read with Chapter VI-A of the Income-tax Act, 1961 - Capital - Computation of - Assessment years 1970-71 and 1971-72 - Notice was issued by ITO under section 8 to assessee on ground that there had been excessive allowance by way of statutory deduction insofar as amounts deducted under sections 80-I and 80J of 1961 Act had not been taken into account for purpose of application of rule 4 - Whether expression "income, profits and gains of a company not includible in its total income as computed under Income-tax Act, 1961" as appearing in rule 4 refers to those sums which are not includible in total income of assessee by provisions of Chapter III of 1961 Act and does not refer to any of deductions claimable under Chapter VI-A of 1961 Act - Held, yes - Whether therefore, claim of revenue that there had been an under-assessment by reason of not treating deduction allowed under sections 80-I and 80J of 1961 Act as amounts not includible in total income of assessee could not be sustained - Held, yes FACTS The assessee was assesseed under the 1964 Act. Subsequently, the ITO was of the view that there had been under assessment in the case of the assessee and issued notices under section 8 to show cause as to why action should not be taken to reassess the assessee. The ITO was of the opinion that there had been excessive allowance by way of statutory deduction inasmuch as the amounts which had been allowed to be deducted under sections 80-I and 80-J of the 1961 Act had not been taken into consideration at the time the assessment orders were passed under the 1964 Act while determining the extent of statutory deduction the assessee was entitled to, and that rule 4 had not been applied in the case of the assessee. Aggrieved by the notices issued, the assessee filed these writ petitions. HELD The correctness or otherwise of the view taken by the authorities depends upon the construction to be placed on rule 4 and the meaning to be given to the expression "income, profits, and gains of a company ,,not includible in its total income as computed under the Income-tax Act" appearing in rule 4. In order to understand…

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