Law:

Section:

Schedule I to the Companies (Profits) Surtax Act, 1964 - Chargeable profits - Computation of - Assessment year 1971-72 - Whether dividend amount which is included in computing total income for purpose of Income-tax Act is amount which has to be excluded while determining chargeable profits -Held, yes - Whether total income referred to in rule 1(viii) would necessarily mean income on which income-tax is to be paid under Income-tax Act - Held, yes FACTS For the assessment year 1971-72, the assessee claimed before the Surtax Officer that in computing the chargeable profits, the gross dividend income should be allowed to be deducted. The Surtax Officer, however, allowed only the net dividend for deduction on the ground that the balance amount had earlier been allowed under sections 80L and 80M. while computing the total income. On appeal, the AAC accepted the assessee's claim. The Tribunal confirmed the said order. On reference: HELD What is intended, and provided, by rule 1(viii) of the First Schedule is that the amount which is included in computing the total income for the purposes of the Income-tax Act is the amount which has to be excluded while determining the chargeable profits. In other words, if for example, the gross dividend receivable is Rs. 1,000. but after allowing deductions permissible under the Income-tax Act what is included in the total income is only Rs. 400, then for the purpose of Surtax Act, it is only Rs. 400 which is to be excluded while determining the figure of chargeable profits. If the contention of the assessee was to be accepted, the result would be that it would give double benefit which was never intended. It could not be that what was included in the total income, which was the basis for computing chargeable profits was Rs. 400, but what was to be excluded by virtue of rule 1(viii) was Rs. 1,000. The amount which was excludedfrom the chargeable profits could only be the amount which was initially included in determining the total income. The total income referred to in rule 1(viii ) would necessarily mean income on which the income-tax was to be paid under the Income-tax Act. Hence, in the instant case, it was the net dividend and…

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