Judgment :- RANGARAJAN J. In this case, the following two questions have been referred "(1) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the capital should not be reduced proportionately in terms of rule 4 of the Second Schedule to the Companies (Profits) Surtax Act, 1964, consequent to the deductions allowed under Chapter VI-A of the Income-tax Act, 1961, in the surtax assessment for the assessment year 1976-77 ? (2) Whether the Appellate Tribunal was right in holding that the loss allowed under section 32(1)(iii) of the Income-tax Act should not be added to the chargeable profits for levy of surtax in the surtax assessment for the assessment year 1976-77 ?"* The first question is concluded by the decision of the Supreme Court in Second ITO v. Stumpp, Schuele and Somappa P. Ltd. We, therefore, answer that question in the affirmative and against the Revenue So far as the second question is concerned, the contention of the Revenue is that since the profit under section 41(2) is excluded by rule 2 of Schedule I, by the same logic, the terminal allowance under section 32(1)(iii) which is in the nature of loss should also be excluded. But this contention ignores the basic difference between the two situations. The main purpose of Schedule I is to ascertain the business profits of the company as determined in the income-tax assessment and make certain adjustments with regard to certain amounts included therein which do not really form part of the business profit. It was for that reason that sub-rule (iv) excludes profit under section 41(2), because that profit which is brought to tax under the Income-tax Act is not really in the nature of business profit. But so far as the terminal benefit under section 32(1)(iii) is concerned, it is really in the nature of depreciation which is already allowed in the income-tax assessment for ascertaining the business profit. Since the terminal benefit continues to bear the same nature of depreciation, there is no reason for excluding the same in ascertaining the business profits for the purpose of surtax. In our opinion, therefore, the answer to the second question also has to be in the affirmative and against the Revenue. No costs.