Companies (Surcharge on Income-tax) Act, 1971
Circular No. 555 was issued by the Central Board of Direct Taxes on 22 February 1990. Its subject is Companies (Surcharge on Income-tax) Act, 1971.
Explains the Companies (Surcharge on Income-tax) Act, 1971, which levied a surcharge of 2.5 per cent on the advance tax payable by every company during the financial year 1971-72. Companies had to pay it on their own motion, without any notice of demand from the Income-tax Officer, on or before 15 March 1972. The surcharge paid was treated as payment of income-tax for the income assessable for assessment year 1972-73, with credit given in self-assessment under section 140A, provisional assessment under section 141A and regular assessment for that year. A company that failed to pay by the due date was deemed to be an assessee in default and liable to simple interest at 9 per cent per annum, with the Income-tax Act provisions on penalty for default in payment and on recovery applying with necessary modifications. The circular stresses that although it is computed on the income-tax payable in advance, the surcharge is a distinct and separate levy and not part of advance tax under sections 208 to 219, so it is left out of account for section 214 interest payable by Government, sections 215 to 217 interest payable by assessees, and section 273 penalty for a false estimate of or failure to pay advance tax.
To explain a separate one-year levy on companies and, in particular, to prevent it being treated as advance tax for the purposes of the interest and penalty provisions.
COMPANIES (SURCHARGE ON INCOME-TAX) ACT, 1971
COMPANIES (SURCHARGE ON INCOME-TAX) ACT
1573. Surcharge on advance tax payable by companies during the financial year 1971-72
The Act provides for the levy of a surcharge at the rate of 2.5 per cent on advance tax payable under the Income-tax Act by all companies during the financial year 1971-72. The amount of the surcharge is required to be paid by companies on their own motion, without the requirement of the service of any notice of demand by the Income-tax Officer, on or before 15-3-1972. The surcharge paid will be treated as payment of income-tax in respect of the income assessable for the assessment year 1972-73 and credit therefor will be given for the purpose of self-assessment under section 140A, provisional assessment under section 141A and regular assessment for that assessment year. In case of failure to make the payment on or before the due date, the company will be deemed to be an assessee in default and will be liable to pay simple interest at the rate of 9 per cent per annum. The provisions of the Income-tax Act relating to imposition of penalty for default in payment of tax and recovery of taxes will apply with necessary modifications.
It is necessary to note that although the surcharge is levied at the rate of 2.5 per cent on the income-tax payable in advance, it is a distinct and separate levy and is not to be regarded as a part of the advance tax payable by the company in accordance with the provisions of sections 208 to 219 of the Income-tax Act. Hence, the amount required to be paid by way of surcharge will not be taken into account for the purposes of applying the provisions of section 214 [interest payable by Government], sections 215 to 217 [interest payable by assessees in certain circumstances] and section 273 [penalty for furnishing false estimate of, or failure to pay, advance tax].Source : Circular No. 77, dated 8-8-1972.
An old company assessment for assessment year 1972-73 where credit for the surcharge, or interest computed as though it were advance tax, was in dispute.
Source: the Income Tax Department’s own published text — its page for this instrument.