Motor And General Finance Ltd. vs Commissioner Of Income-Tax
1992 Latest Caselaw 454 Del

JUDGMENT

B.N. Kirpal, J.

1. This is a reference under section 256(1) of the Income-tax Act, whereby the Income-tax Appellate Tribunal has referred the following two question to this court :

"1. Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was legally justified in holding that the petitioner-company was not entitled to claim deduction on account of surtax paid (in an application under) under section 154 of the Income-tax Act, 1961 ?

2. Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was legally justified in holding that surtax paid by the petitioner-company was not deductible expenditure in computing the company's income from business ?"

2. Briefly stated, the facts are that, in respect of the assessment years 1967-68 to 1973-74, the assessments were framed by the Income-tax Officer. The petitioner paid the income-tax and surtax on the income so computed.

3. The assessed then filed applications under section 154 of the Income-tax Act for all these assessment years claiming deduction on account of surtax paid by it on the ground that its deduction was omitted to be claimed in the original assessments by mistake.

4. The Income-tax Officer dismissed the said application by following a decision of the Special Bench of the Bombay Tribunal in which it was held that surtax liability was not deductible in computing income from business. The appeals filed to the Commissioner of Income-tax (Appeals) were also unsuccessful. Further appeals filed were also dismissed by the Income-tax Appellate Tribunal.

5. On an application under section 256(1) being filed, the Tribunal has referred the aforesaid two questions to this court.

6. At least, seven High Court have held that deduction of surtax which is paid is not allowable while computing the taxable income. In arriving at this conclusion, the High Courts have relied on the provisions of section 40 of the Income-tax Act. These decisions are Molins of India Ltd. v. CIT , CIT v. International Instruments (P) Ltd. [1983] 144 ITR 936 (Kar), S. L. M. Maneklal Industries Ltd. v. CIT [1988] 172 ITR 176 (Guj), Associated Stone Industries (Kota) Ltd. v. CIT [1988] 170 ITR 653 (Raj), Sundaram Industries Ltd. v. CIT [1986] 159 ITR 646 (Mad), A. V. Thomas and Co. Ltd. v. CIT [1986] 159 ITR 431 (Ker) [FB] and Vazir Sultan Tobacco Co. Ltd. v. CIT .

7. There is, however, on decision of the Gauhati High Court which has struck a different note. In Doom Dooma Tea Co Ltd. v. CIT [1989] 180 ITR 126, the Gauhati High Court has come to the conclusion that the amount of surtax paid is allowable as a deduction. It is on this decision that strong reliance is being placed by Mr. Chawla.

8. The Supreme Court in the case of T. S. Balaram. ITO v. Volkart Brothers [1971] 82 ITR 50, has held that, if there is a debatable question which arises, then an application for rectification under section 154 of the Income-tax Act is not maintainable. The assessed in the present case was claiming deduction of the surtax which was paid. Seven High Courts have decided against this proposition which is being propounded by the assessed. Even though the Gauhati High Court has accepted the plea that doubt that, with a score seven is to one, the point involved is highly debatable, to say the least. Under these circumstances, the principle of law enunciated by the Supreme Court in Volkart Brothers' case [1971] 82 ITR 50 is clearly applicable. The application under section 154 of the Income-tax Act was itself, therefore, not maintainable. If the assessed had any grievance, the remedy would has been either to file an appeal against the assessment order or to file a revision to the Commissioner of Income-tax. Under no circumstances, could an application under section 154 be filed.

9. For the aforesaid reasons, question No. 1 has to be answered in the affirmative and against the assessed. The result of this is that the application under section 154 was rightly held to be not maintainable and, as a consequence thereof, question No. 2 does not survey and, therefore, need not be answered. Parties to bear their own costs.