| Citation(s) |
|---|
| 1997 SLG 45 1997 SLD 45 1997 PTD 422 (1996) 219 ITR 581 |
Supreme Court of India
Civil Appeals Nos. 1187, 1188 of 1985 with 455 of 1987, 3699 to 3700 of 1984, 2133 of 1991, 816 of 1988, 4818, 4819 of 1990, 1732, 1733 of 1990, 197 of 1989, 3698 of 1984, 5018 to 21 of 1991, 3246 of 1995, 3976, 3977 of 1995, 9176, 9177 of 1995, 10051 of
B.P.JEEVAN REDDY AND K. T. THOMAS, JJ
G.B. Pai and J. Ramamurthy, Senior Advocates (Mukul Mudgal, O.C. Mathur, Ms. A.K. Verma, Advocates for Messrs J.B.D. & Co., A. Subba Rao, Anil Srivastava, S.N. Terdol, Advocates with them) for the Appearing Parties
Civil Appeals Nos. 1187, 1188 of 1985 with 455 of 1987, 3699 to 3700 of 1984, 2133 of 1991, 816 of 1988, 4818, 4819 of 1990, 1732, 1733 of 1990, 197 of 1989, 3698 of 1984, 5018 to 21 of 1991, 3246 of 1995, 3976, 3977 of 1995, 9176, 9177 of 1995, 10051 of
B.P.JEEVAN REDDY AND K. T. THOMAS, JJ
G.B. Pai and J. Ramamurthy, Senior Advocates (Mukul Mudgal, O.C. Mathur, Ms. A.K. Verma, Advocates for Messrs J.B.D. & Co., A. Subba Rao, Anil Srivastava, S.N. Terdol, Advocates with them) for the Appearing Parties
SMITH KLINE AND FRENCH (INDIA) LTD. and others
VS
COMMISSIONER OF IncomE tax
Law: Income Tax Act, 1961
Section: 30,39,40
Income tax----- Business expenditure---Amounts not deductible---Scope of S.40(a)(ii)--¬Company---Surtax is levied on the profits of a company---Surtax is not deductible---Indian Income Tax Act, 1961, S.40(a)(ii)---Indian Companies (Profits) Surtax Act, 1964---[Makum Tea Co. (India) Ltd. v. CIT (1989) 178 ITR 453 (Gauhati) reversed and Doom Dooma Tea Co. Ltd. v. CIT (1989) 180 ITR 126 (Gauhati) overruled]. Section 40 of the Income Tax Act, 1961, opens with a non obstante clause "notwithstanding anything to the contrary in sections 30 to 39", which means that even if any amount is entitled to deduction under any of the provisions contained in sections 30 to 39, it will be disallowed if it falls, inter alia, within sub-clause (ii) of clause (a) of section 40. Sub-clause (ii) of clause (a) of section 40 states that any sum paid on account of any rate or tax levied on the profits or gains of any business or profession or assessed at a proportion of, or otherwise on the basis of any such profits or gains, will not be deductible. The preamble to the Companies (Profits) Surtax Act, 1964, says that it is "an Act to impose a surtax on the profits of certain companies". The Statement of Objects and Reasons appended to the Bill makes the said intention clear. A perusal of section 4 of the Companies (Profits) Surtax Act which is the charging section and section 2(5) which defines "chargeable profits" makes it clear beyond any doubt that the surtax is levied on the profits of a company, i.e., on the profits above the prescribed limit. The mere fact that the tax is levied upon chargeable profits (which means the total income of the assessee computed under the Income Tax Act, 1961, adjusted in accordance with the provisions of the First Schedule to the Companies (Profits) Surtax Act, 1.964) does not mean that the tax is not levied on the profits of business. A reading of section 15 of the Companies (Profits) Surtax Act makes it evident that its operation is confined to the computation of the distributable income of a company for the purposes of Chapter XI of the Income Tax Act, 1961. It cannot be extended to any other chapter or provision in the Act. The Court had made the…
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