Commissioner of Income Tax vs Automotive Manufacturers Ltd.

T.D. Sugla J.

This is an application u/s 256(2) of the Income Tax Act, 1961. The question sought to be referred is :

"Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that, in computing the chargeable profits as per the First Schedule to the Companies (Profits) Surtax Act, 1964, the Income Tax on the net dividend should be reduced from the total income as per rule 1(viii) of the First Schedule ?"

It is evident that the question raised in not as to whether the gross dividend or the net dividend is required to be excluded from the total income under rule 1(viii) of the First Schedule to the Surtax Act for the purpose of computing chargeable profits. Indeed, such question could not be raised in the present proceedings, as that question was decided by the Commissioner of Income Tax (Appeals) originally and the order was accepted by the Department. The question revised herein arises out of the order of the Inspecting Assistant Commissioner (Assessment) as, while giving effect to the aforesaid appellate order, he held that, under rule 2(i)(a) of the First Schedule, Income Tax payable on the gross dividend was to be excluded. The Tribunal held, and in our opinion rightly, that the tax payable on the net dividend alone was required to be excluded under rule 2(i)(a). The provisions of rule 2(i)(a) clearly envisage the exclusion of tax payable on income, under certain clauses, included in the total income. It cannot be disputed that what was included in the total income was the net dividend and not the gross dividend. The answers to the the question is, thus, obvious. No useful purpose will be served in directing the Tribunal to state the case and refer the question. Rule is, accordingly, discharged with no order as to costs.