TMI Blog2002 (12) TMI 4X X X X Extracts X X X X X X X X Extracts X X X X ..... erred to as the "Act"). Section 115J, i.e., in Chapter XII-B of the Act which is entitled "Special provisions relating to certain companies". It was inserted by the Finance Act, 1987, with effect from the assessment year 1988-89 and remained in operation till the assessment year 1990-91. The relevant extract of section 115J reads as follows: "115J. (1) Notwithstanding anything contained in any other provision of this Act, where in the case of an assessee being a company (other than a company engaged in the business of generation or distribution of electricity), the total income, as computed under this Act in respect of any previous year relevant to the assessment year commencing on or after the 1st day of April, 1988 but before the 1st day of April, 1991 (hereafter in this section referred to as the relevant previous year), is less than thirty percent of its book profit, the total income of such assessee chargeable to tax for the relevant previous year shall be deemed to be an amount equal to thirty percent of such book profit. (1A) Every assessee, being a company, shall, for the purposes of this section, prepare its profit and loss account for the relevant previous year in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 61, and not by way of application of the provisions of section 115J(1) and that the resultant amounts of losses, unabsorbed depreciation, unabsorbed investment allowance, etc., only will be required to be carried forward to the next year? (2) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the written down value of the assets will have to be adjusted by deducting therefrom the amounts of depreciation which would have been allowed on such assets in the regular method of assessment in accordance with the provisions of sections 28 to 43 of the Income-tax Act, 1961, without applying the provisions of section 115J(1), and the resultant amounts of written down value will only have to be carried forward to the next year ?" Similar orders were passed by the Tribunal in the case of other appellants. The High Court by a common order and judgment upheld the reasoning Of the Tribunal and answered the references in favour of the Revenue and against the assessees. According to Mr. S. Ganesh, learned senior counsel appearing on behalf of one of the appellants, an assessee-company which was otherwise entitled to various deductions under th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctly to the purpose for which it is introduced. In any event, it is submitted by learned counsel that if there were any doubt in the interpretation of the provisions, the doubt must be resolved in favour of the assessee on the basis of the principles enunciated in CIT v. J. H. Gotla [1985] 156 ITR 323 (SC). Mr. R. P. Bhatt, learned senior counsel appearing on behalf of the Revenue, has submitted that section 115J was aimed at those companies which were in fact profit making but submitted "nil" assessments of their total income by virtue of the deductions permitted under the Act. In the case of such "zero tax companies", the intention of section 115J was to levy tax on such companies by fixing a notional assessable income which was 30 percent of the book profit. Learned counsel has relied upon the reasoning of the decision of the Division Bench of the Andhra Pradesh High Court in Suryalatha Spg. Mills Ltd. v. Union of India [1997] 223 ITR 713, and has submitted that the assessee cannot under section 115J(2), be permitted to carry forward those deductions which had already been claimed and allowed by the Department in arriving at the zero assessment figure. According to Mr. Bhatt, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave been entitled under the provisions of sections 32(2), 32A(3), 72(1)(ii), 73, 74, 74A(3) and 80J(3) to carry forward only the unabsorbed depreciation allowance under section 32, investment allowance under section 32A, losses under sections 72, 72A, 73, 74 and permissible deductions under section 80J to the following assessment year to be set off against the profits and gains of that assessment year. All that section 115J(2) does is to preserve this right, viz., to carry forward the balance of the unabsorbed deductions in the relevant previous year to the next assessment year. Section 115J does not create any right nor does it serve to allow all the deductions taken into consideration for determining whether the total income should be quantified under section 115J(1), to be carried forward under sub-section (2) of section 115J. It allows only the unabsorbed losses, depreciation, investment allowance, etc., which otherwise could have been carried forward, to be carried forward. This construction of sub-sections (1) and (2), section 115J is in keeping with the avowed purpose for which Chapter XII-13 was introduced in the Act by the Finance Act, 1987. This was stated by the Finan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o tax such companies which are making huge profits and also declaring substantial dividends but are managing their affairs in such a way as to avoid payment of income-tax, as a result of various tax concessions and incentives and for that purpose, the taxable income is determined under subsection (1) of section 115J, if any loss equal to the income thus determined is allowed to be adjusted, then that would frustrate and nullify the very object of enacting the provision". The reasoning appears to us to be unexceptionable. In Lallacherra Tea Co. (P.) Ltd. v. CIT [1999] 239 ITR 611, relied upon by the appellant, the Guwahati High Court was considering a case of an assessee-company which had filed a return in which the total income computed was less than 30 percent of its book profit. After computing its book profit, in terms, of section 115J(1), a sum of Rs. 74,477 was deemed to be the total income chargeable to tax for the assessment year, namely, 1987-88. In the assessment year 1988-89, the company sought to deduct the sum of Rs. 74,477 rounded off to Rs. 74,450 from its total income. The Revenue opposed this. The submission of the assessee was that the tax would not have been de ..... X X X X Extracts X X X X X X X X Extracts X X X X
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