Law: Income Tax Ordinance, 1979

Section: 10

Income tax Ordinance (XXXI of 1979)--S. 10 Surcharge Calculation of. For calculating the surcharge the total income of the year under consideration is to be considered and then deducted therefrom the amounts retained for meeting working capital requirements and/or for capitalisation. On the balance income tax is calculated at the appropriate rate and then 10 of this amount of such tax represents the surcharge payable. (1979) 40 Taxation 47 (Trib.) ref. ORDER In these three departmental appeals, the solitary objection relates to the method of working out the levy of surcharge by the learned Appellate Assistant Commissioner. In view of common objections arising out of the similar facts, the three appeals are being disposed of by a combined order. In the assessment year 1977 78 the Income tax Officer proceeded from the total income (amount before charging Workers' Participation Fund) amounting to Rs.7,791,994. From this income the Income tax Officer deducted the following amounts Considering theca to be retained income: Rs Rs Total Income 7,791,994 (i) Amounts transferred to machinery replacement reserve,. 2,000,000 (ii) Exchange fluctuation reserve 122.453 (iii) Un-appropriated profit and loss account balance Total 174,800 2,297,253 Income liable to surcharge 5,494,741 The appellant preferred an appeal before the learned Appellate Assistant Commissioner who proceeded on the basis of a Chart submitted to her by the assessee by adopting the income before tax shown as per books at Rupees 7,342,148. For working out the retained income she has reproduced the statement given by the learned Authorised Representative of the respondent and appears to have thus, proceeded on the basis of book profit before tax, instead of income assessed as Rs. 7,791,994 as correctly adopted by the Income tax Officer. Further working of the learned Appellate Assistant Commissioner, is not available indicating the manner in which the actual retained income is to be worked out and surcharge calculated on the balance of income (un-retained). In the charge year 1977 78 she appears to have inter alia, treated tax provision of Rs. 32 lacs as retained income which appears to be wrong because…

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