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Judgment
Mishra, J.—Our attention has been drawn to a judgment of the Supreme Court in the case of Distributors (Baroda) Pvt. Ltd. Vs. Union of
India (UOI) and Others, and the judgment of this court in Virudhunagar Textile Mills Ltd. (Tax Cases Nos. 136 and 137 of 1979) (order dated
June 19, 1986), under which, it has been pointed out that it will be right in law in holding that in arriving at the chargeable profit for purposes of
surtax assessment, under the Companies (Profits) Surtax Act, 1964, the net dividend should be deducted from the total income and not the gross
dividend. The Supreme Court judgment, true, is in respect of the payment of Income Tax and not under the Companies (Profits) Surtax Act; but
the judgment of this court in Tax Cases Nos. 136 and 137 of 1979 has extended the application of the said principle to the Companies (Profits)
Surtax Act also, and in our opinion, rightly. The question, therefore, whether, on the facts and in the circumstances of the case, the Appellate
Tribunal was right in law in holding that in arriving at the chargeable profits for the purpose of surtax assessment for the assessment year 1972-73,
the gross dividend should be deducted from the total income instead of the net dividend, which ultimately came to be included in the total income
after allowance of relief u/s 80M of the Income Tax Act, 1961, has to be answered against the assessee and in favour of the Revenue.
The second question, whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the capital
computed under the Companies (Profits) Surtax Act, should not be reduced in proportion to the relief allowed in the Income Tax assessment
under Chapter VI-A of the Income Tax Act, 1961, in terms of rule 4 of the Second Schedule to the Surtax Act, has to be answered in one
sentence, as we have done in Tax Cases Nos. 853 to 858 of 1982 (judgment dated February 2, 1995) and in the same way as the Supreme
Court has done in Second Second Income Tax Officer and Another Vs. Stumpp Schuele and Somappa (P) Ltd., , ""there is a preponderance of
judicial opinion in favour of the assessee, with which we agree"". The reference is answered accordingly. No costs.