Define Allocable Surplus and Available Surplus.

Allocable Surplus [Section- 2 (4)]:  Allocable surplus means:

In relation to an employer, being a company (other than a banking company) which has not made the arrangements prescribed under the Income tax Act for the declaration and payment within India of the dividends payable out of its profits in accordance with the provisions of section 194 of that Act, 67% of the available surplus in an accounting year. In any other case, 60% of such available surplus. [Sec. 2(4)].

Available Surplus (Sec. 2(6)):

Available surplus means the available surplus computed under section 5.

According to Section 5, the available surplus in respect of any accounting year is the gross profit for that year after deducting there from the sum referred to in Section 6.

Providing that the available surplus in respect of the accounting year commencing on any day in the year 1968 and in respect of every subsequent accounting year shall be the aggregate of —

1. The gross profits for the accounting year after deducting there form the sum referred to in Section 6.
2. An amount equal to the difference between. The direct-tax calculated according to the provision of Section 7, in respect of an amount equal to the gross profits of the employer for the immediately preceding accounting year.
3. The direct tax calculated as per the provision of Section 7, in respect of an amount equal to the gross profits of the employer for such preceding accounting year after deducting there form the amount of bonus which the employer has paid or is liable to pay to his employees in accordance with the provisions of this Act for that year.