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First Schedule, Rule 2(i), to Super Profits Tax Act, 1963, read with sections 2(43) & 271(1)(a) of the Income-tax Act, 1961 – Chargeable profits – Computation of – Assessment year 1963-64 – Whether what is levied under charging provisions of 1961 Act, i.e., Section 4, alone can be called income-tax, and interest penalties and fines payable under other provisions of 1961 Act can not be termed as ‘income-tax' as they are imposed in addition to income-tax for purpose of enforcing levy of income-tax - Held, yes - Whether, therefore, penalty levied under section 271(1)(a) of 1961 Act was not deductible under rule 2(i) of First Schedule while computing chargeable profits under Act – Held, yes FACTS The ITO while determining the chargeable profits under the Act, rejected the assessee's claim for deduction of penalties levied under section 271(1), and interest charged under the provisions of the 1961 Act. Both the AAC and the Tribunal upheld the ITO's order. On reference : HELD Section 2(43) of the 1961 Act, defines ‘tax' during the relevant period as income-tax and super-tax chargeable under the provisions of that Act. Therefore what is levied under the charging provisions of that Act, i.e., section 4 of the Income-tax Act, alone can be called income-tax. Interest, penalties and fines, which are also payable under the other provisions of that Act cannot be termed as income-tax. They are imposed in addition to income-tax for the purpose of enforcing the levy of income-tax. Therefore, the penalty payable under an order made pursuant to section 271(1)(a) of the 1961 Act was not deductible under rule 2(1) of the First Schedule to the Act. Note : The decision was in favour of revenue. CASES REFERRED TO C.A. Abraham v. ITO [1961] 41 ITR 425 (SC), CIT v. Anwar Ali [1970] 76 ITR 696 (SC), Hindustan Steel Ltd. v. State of Orissa [1970] 25 STC 211/[1972] 83 ITR 27 (SC), Lal Chand Gopal Das v. CIT [1963] 48 ITR 324 (All.), Fattorini (Thomas) (Lancashire) Ltd. v. IRC [1942] 24 TC 328; [1943] 11 ITR (Supp.) 50 (HL) andBhor Industries Ltd. v. CIT [1961] 42 ITR 57 (SC). JUDGMENT Venkataramaiah, J. —The question of law referred to this court in this case by the Income-tax…

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