JUDGMENT
1. The Income-tax Appellate Tribunal (Delhi Bench), referred the following question under Section 256(1) of the Income-tax Act, 1961, for the opinion of this court :
"Whether, on the facts and in the circumstances of the case, the Tribunal was correct in holding that the assessee was not entitled to a deduction of its liability under the Companies (Profits) Surtax Act, 1964, in computing its income from business under the Income-tax Act, 1961, for the assessment year 1975-76 ?"
2. The relevant assessment year herein is 1975-76. The assessee, a private limited company, carried on business in the manufacture and sale of ayurvedic and unani medicines in the said assessment year. It claimed a deduction of the surtax payable by it from the business profits of this year in the income-tax assessment, The authorities below rejected the claim. The assessee failed on further appeal before the Tribunal as well.
3. There are divergent views of the High Courts on the question whether surtax is deductible in computing the company's income from business under the Income-tax Act, 1961.
4. In Molins of India Ltd. v. CIT [1983] 144 ITR 317 (Cal), which was later followed by the High Courts of Andhra Pradesh, Madras, Gujarat, Punjab and Haryana, Bombay, etc., the Calcutta High Court held :
5. That the tax imposed by the Companies (Profits) Surtax Act, 1964, is essentially of the same character as income-tax or excess profits tax. Surtax, like excess profits tax, is basically an additional tax levied on the income of a company. It is a tax on so much of the chargeable profits of the previous year as exceeds the statutory deduction at the rate specified in the Act. The Legislature has imposed an additional levy on the total income of a company. The subject-matter of the levy is the income of the company. That income does not cease to be the income of the company merely because an additional tax is imposed upon it. Upon the conclusion reached by the Calcutta High Court is that the surtax payable by a company is not deductible in determining its liability to income-tax.
6. Contrary to the view taken by the Calcutta High Court, the Gauhati High Court in Doom Dooma Tea Co. Ltd. v. CIT [19891 180 ITR 126 held that surtax is different from income-tax in all attributes and perspectives. Surtax was paid by the assessee in that case under the compulsion of the statute for running the business of tea and, therefore, has to be allowed to be deducted under Section 37 of the Income-tax Act.
7. We feel inclined to accept the view taken by the Calcutta High Court and following that we answer the referred question in the affirmative, i.e., against the assessee and in favour of the Revenue.
8. The record of the case be sent down to the Appellate Tribunal within fifteen days to pass an order conformably to our order.