Companies (Profits) Surtax Act, 1964- Schedules

First Schedule

First Schedule

[See Section 2(5)]

Rules for computing the chargeable profits

In computing the chargeable profits of a previous year, the total income computed for that year under the Income-tax Act shall be adjusted as follows:—

1. Income, profits and gains and other sums falling within the following clauses shall be excluded from such total income, namely:—

(i) any income chargeable under the Income-tax Act under the head “Capital gains”;

(ii) any compensation or other payment as is referred to in clause (ii) of Section 28 of the Income-tax Act;

(iii) profits and gains of any business of life insurance;

(iv) any income referred to in sub-section (2) of Section 41 of the Income-tax Act;

(v) [i][* * *]

(vi) income chargeable under the Income-tax Act under the head “Interest on securities” derived from any security of the Central Government issued or declared to be income-tax free of from any security of a State Government issued income-tax free, the income-tax whereon is payable by the State Government;

[ii][(vii) an amount equal to fifty per cent. of the sum with reference to which a deduction is allowable to the company under the provisions of Section 80-G of the Income-tax Act;]

(viii) income by way of dividends from an Indian company or a company which has made the prescribed arrangements for the declaration and payment of dividends within India;

(ix) income by way of royalties received from Government or a local authority or any Indian concern;

(x) in the case of a non-resident company which has not made the prescribed arrangements for the declaration and payment of dividends within India, its income by way of any interest or fees for rendering technical services received from Government or a local authority or any Indian concern;

(xi) in the case of a banking company—

(a) any sum which during the previous year is transferred by it to a reserve fund under sub-section (1) of Section 17 of the Banking Companies Act, 1949 (10 of 1949) or is deposited by it with the Reserve Bank of India under sub-clause (ii) of clause (b) of sub-section (2) of Section 11 of that Act, not exceeding the amount required under the aforesaid provisions to be so transferred or deposited, as the case may be, or

(b) any sum transferred by it during the previous year to any reserves in India including reserves not shown as such in its published balance-sheet in so far as the sums transferred to such reserves are attributable to income chargeable to tax under the Income-tax Act and have not been allowed as a deduction in computing its total income under that Act and in so far as the aggregate of such sums does not exceed the highest of the aggregate of such sums, if any, so transferred during any one of the three years prior to the previous year,

whichever is higher;

(xii) the amount of any deduction from the income-tax [iii][* * *] chargeable on the total income allowed under the annual Finance Act in connection with export of any goods or merchandise out of India or the sale by a manufacture or any articles to any person who exports them out of India.

[iv][Explanation.—Notwithstanding anything contained in any clause of this rule, the amount of any income or profits and gains which is required to be excluded from the total income under that clause shall be only the amount of such income or profits and gains as computed in accordance with the provisions of the Income-tax Act (except Chapter VI-A thereof), and in a case where any deduction is required to be allowed in respect of any such income or profits and gains under the said Chapter VI-A, the amount of such income or profits and gains computed as aforesaid as reduced by the amount of such deduction.]

2. The balance of the total income arrived at after making the exclusions mentioned in Rule 1 shall be reduced by—

(i) the amount of income-tax [v][* * *] payable by the company in respect of its total income under the provisions of the Income-tax Act after making allowance for any relief, rebate or deduction in respect of income-tax and super-tax to which the company may be entitled under the provisions of the said Act or the annual Finance Act, and after excluding from such amount—

(a) the amount of income-tax [vi][* * *], if any, payable by the company in respect of any income referred to in clause (i) or clause (ii) or clause (iii) or clause (viii) of Rule 1 included in the total income;

[vii][(b) the amount of income-tax, if any, payable by the company under the provisions of the annual Finance Act with reference to the relevant amount of distributions of dividends by it.

Explanation.—In this sub-clause, the expression “the relevant amount of distributions of dividends” has the meaning assigned to it in the Finance Act of the relevant year;]

[viii][(c) the amount of income-tax, if any, payable by the company under Section 104 of the Income-tax Act.

Explanation.—In relation to the assessment year commencing on the 1st day of April, 1964, the reference in this sub-clause to “income-tax” shall be construed as a reference to “super-tax”;]

(ii) in the case of a company which has been charged to tax in a country outside India on any portion of its income, profits and gains included in its total income as computed under the Income-tax Act, the tax actually paid in respect of such income, profits and gains in the said country in accordance with the laws in force in that country after allowance of every relief due under the said laws:

Provided that the aforesaid reduction shall not be allowed unless the assessee produced evidence of the fact of the payment of the aforesaid tax in that country.

3. The net amount of income calculated in accordance with Rule 2 shall be increased [ix][by the amount of any expenditure] incurred on account of commission, entertainment and advertisement, to the extent such expenditure, in the opinion of the [x][Assessing Officer], is excessive having regard to the circumstances of the case:

Provided that the previous authority of the [xi][Deputy Commissioner] is obtained for holding such expenditure to be excessive.

Second Schedule

Second Schedule

[See Section 2(8)]

Rules for computing the capital of a company for the purposes of surtax

1. Subject to the other provisions contained in this Schedule, the capital of a company shall be the aggregate of the amounts, as on the first day of the previous year relevant to the assessment year, of—

(i) its paid-up share capital;

ii) its reserves, if any, created under the proviso (b) to clause (vi-b) of sub-section (2) of Section 10 of the Indian Income-tax Act, 1922 (11 of 1922) or under [xii][sub-section (4) of Section 32-A, or sub-section (3) of Section 34] of the Income-tax Act, 1961 (43 of 1961);

(iii) its other reserves as reduced by the amounts credited to such reserves as have been allowed as a deduction in computing the income of the company for the purposes of the Indian Income-tax Act, 1922 (11 of 1922) or the Income-tax Act, 1961 (43 of 1961);

(iv) [xiii][* * *]

(v) [xiv][* * *]

Explanation.—For the removal of doubts it is hereby declared that any amount standing to the credit of any account in the books of a company as on the first day of the previous year relevant to the assessment year which is of the nature of item (5) or item (6) or item (7) under the heading “RESERVES AND SURPLUS” or of any item under the heading “CURRENT LIABILITIES and PROVISIONS” in the column relating to “Liabilities” In the “Form of Balance-sheet” given in Part I of Schedule VI to the Companies Act, 1956 (1 of 1956) shall not be regarded as a reserve for the purposes of computation of the capital of a company under the provisions of this Schedule.

[xv][1-A. Where a company has not made any credit in any account in its books as on the first day of the previous year relevant to the assessment year which is of the nature of item (8) or item (9) under the heading “CURRENT LIABILITIES AND PROVISIONS” in the column relating to “LIABILITIES” in the “FORM OF BALANCE-SHEET”, given in Part I of Schedule VI to the Companies Act, 1956 (1 of 1956), or where the [xvi][Assessing Officer] is of opinion that the amount credited in such account falls short of the amount which should have reasonably been credited by it, the amount of its capital as computed under Rule 1 shall be reduced by the amount which has not been so credited or, as the case may be, the amount of such shortfall.

Explanation.—For the purposes of this rule, the amount of credit which should have reasonably been made by a company in relation to any account of the nature of item (9) aforesaid, means the amount of dividend declared or paid by the company, on or after the first day of the previous year relevant to the assessment year, for the previous year immediately preceding the first mentioned previous year.]

2. Where a company owns any assets the income from which in accordance with clause (iii) or clause (vi) or clause (viii) of Rule 1 of the First Schedule is required to be excluded from its total income in computing its chargeable profits, the amount of its capital as computed under Rule 1 of this Schedule shall be diminished by the cost to it of the said assets as on the first day of the previous year relevant to the assessment year in so far as such cost exceeds the aggregate of—

(i) any moneys borrowed [xvii][* * *] and remaining outstanding as on the first day of the said previous year; and

(ii) the amount of any fund, any surplus and any such reserve as is not to be taken into account in computing the capital under Rule 1.

Explanation 1.—A paid-up share capital or reserve brought into existence by creating or increasing (by revaluation or otherwise) any book asset is not capital for computing the capital of a company for the purposes of this Act.

Explanation 2.—Any premium received in cash by the company on the issue of its shares standing to the credit of the share premium account shall be regarded as forming part of its paid-up share capital.

Explanation 3.—Where a company has different previous years in respect of its income, profits and gains, the computation of capital under Rules 1, 2 and 3 shall be made with reference to the previous year which commenced first.

3. Where after the first day of the previous year relevant to the assessment year the capital or a company as computed in accordance with the foregoing rules of this Schedule is increased by any amount during that previous year on account of increase of paid-up share capital [xviii][or is reduced by any amount on account of reduction of paid-up share capital,] such capital shall be increased or reduced, as the case may be, by a sum which bears to that amount the same proportion as the number of days of the previous year during which the increase or the reduction remained effective bears to the total number of days in that previous year.

4. Where a part of the income, profits and gains of a company is not includible in its total income as computed under the Income-tax Act, its capital shall be the sum ascertained in accordance with Rules 1, 2 and 3, diminished by an amount which bears to that sum the same proportion as the amount of the aforesaid income, profits and gains bears to the total amount of its income, profits and gains.

Third Schedule

[xix]Third Schedule

(See Section 4)

Rates of surtax

Surtax shall be charged on the amount (hereinafter referred to as the chargeable amount) by which the chargeable profits exceed the amount of the statutory deduction at the following rates, namely:—

[xxi][Provided that where in the case of an Indian company or a company which has made the prescribed arrangements for the declaration and payment of dividends within India—

(i) which is such a company as is referred to in Section 108 of the Income-tax Act, and

(ii) whose paid-up share capital (subscribed and paid for in cash) as on the last day of the previous year, is not less than twenty-five per cent. of the amount of the capital as computed under the Second Schedule to this Act,

the aggregate of—

(a) the amount of income-tax payable by the company in respect of its total income of the previous year under the provisions of the Income-tax Act after making allowance for any relief, rebate or deduction in respect of income-tax to which the company is entitled under the provisions of the said Act or the annual Finance Act; and

(b) the amount of surtax computed in accordance with the foregoing provisions of this Schedule,

exceeds the amount calculated at seventy per cent. of the total income of the company, the amount of such excess shall be deducted from the amount of surtax referred to in clause (b) above and the balance shall be the amount of the surtax payable by the company.]

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