Law:

Section:

clause (x) of rule 1 of first schedule to super profits tax act, 1963-interest on securities-whether any interest on securities received from government could be excluded in computation of chargeable profits in terms of the said clause-held, yes-whether entire interest earned by assesses could be deducted without any reduction either for interest paid by assessee or by amounts expended in order to earn that interest-held, yes Facts The assessee was a non-resident company. It made no prescribed arrangements for declaration and payment of dividends in India. For the assessment year 1963-64, Rs. 2,18,802 were included in the total income of the assessee under the head, "Interest on securities". The assessee's contention that the amount was by way of interest on securities received from the Government and as such, fell within the purview of clause (x) of rule 1 of the First Schedule to the Act and, therefore, to be excluded in computing the chargeable profits for super profits tax, was rejected by the Super Profits Tax Officer. The AAC, however, took the view that the interest on securities received from the Government fell within the purview of clause (x ) and, therefore, was liable to be excluded. But, he reduced the income on securities by proportionate interest on borrowings and other expenses and, after determining it at Rs. 37,683, excluded the same from chargeable profits for super profits tax purposes. Before the Tribunal, the Department contended that clause (vi ) provided for exclusion of interest on securities which were declared to be income-tax free and, therefore, interest on securities could not be considered to be within the purview of interest contemplated by clause ( x). The Tribunal rejected the contention and held that the two clauses provided two different matters, viz., while the benefit of clause (vi) was available to all assessees, that of clause (x) was available only to non-resident companies and that too, if such company had not made the prescribed arrangements for declaration and payment of dividends within India. The Tribunal, therefore, held that the interest earned on Government securities was directly covered in the case of a…

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