9911796707
TMI Blog2002 (12) TMI 4X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 accordance with the provisions of Parts 11 and III of Schedule VI to the Companies Act, 1956 (1 of 1956).... (2) Nothing contained in sub-section (1) shall affect the determination of the amounts in relation to the relevant previous year to be carried forward to the subsequent year or years under the provisions of sub-section (2) of section 32 or sub-section (3) of section 32A or clause (ii) of sub-section (1) of section 72 or section 73 or section 74 or sub-section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 the provisions of the Act from its total income, in computing its total income, was liable under section 115J to pay tax on 30 percent of the company's book profit irrespective of the actual deductions claimed by it for the period when section 115J was in operation. It is submitted that in such circumstances it cannot be said that the benefits of deduction which the assessee had claimed had been actually allowed and, therefore, the assessee/appellant should have been permitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g 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, had the deductions not been actually allowed as claimed by the appellant, the assessee would not have been liable to pay only the tax on the book profit but tax on the actual income. The constitutional validity of section 115J of the Act is not in dispute before us. The only issue is its interpretation. Section 115J(1) commences with a non-obstante clause. Plainly read, it provides for two stages: (a) computation of income of the assessee under the Act in respect of any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 Finance Minister in his Budget Speech' in the following manner. "It is only fair and proper that the prosperous should pay at least some tax. The phenomenon of so called 'zero-tax' highly profitable companies deserves attention. In 1983, a new section 80VVA was inserted in the Act so that all profitable companies pay some tax. This does not seem to have helped and is being withdrawn. I now propose to introduce a provision whereby every company will have to pay a 'minimum corporate tax' o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pears 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 demanded against the amount which was adjusted. Upsetting the finding of the Tribunal, the court held in favour of the assessee on the basis of a hypothetical example which, in our view, proceeds on a complete mis-appreciation of section 115J. The decision of this court in Madeva Upendra Sinai v. Union of India [1975] 98 ITR 209, related to the constitutional validity of the Taxation Laws (Extension to Union Territories) (Removal of Difficulties) Order No. 2 of 1970 by which the provision ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
