S.S.Sodhi, J.

1. The matter here concerns surtax for the assessment years 1973-74, 1974-75 and 1975-76.

2. The assessee-company, Oswal Woollen Mills Limited, was assessed to surtax for the three assessment years in question. In order to work out the profits chargeable to surtax, the capital of the assessee-company had to be computed as per the Second Schedule to the Companies (Profits) Surtax Act and the interpretation of Rule 4 of that Schedule with reference to the relief allowed under Section 80J of the Income-tax Act, 1961 (hereinafter referred as "the Act"). The Income-tax Officer came to the conclusion that proportionate deduction in the capital under Rule 4 on account of the deductions allowed under Sections 80J and 80G of the Act, was warranted and he accordingly reduced the capital computed for the three assessment years in question for the purpose of working out the standard deduction at the rate of 10 per cent. of the amount of capital computed. The Income-tax Officer, however, negatived the assessees contention on the point and held that when a sum was deducted from the total income, it did not find place in the total income when it was computed and in view ther