TMI Blog1995 (5) TMI 52X X X X Extracts X X X X X X X X Extracts X X X X ..... --------- Total : Rs. 29,28,146 -------------- The assessment for the assessment year 1989-90 was made by invoking the provisions of section 115J and the assessee's total 'income in accordance therewith was determined at Rs. 9,74,816. For the assessment year 1990-91 also the total income was similarly determined at Rs. 6,73,920. The provisions of section 115J were omitted with effect from 1-4-1991, that is from the assessment year 1991-92, which is the year under appeal. In the year under appeal while completing the assessment under section 143(3), the assessee claimed that an amount of Rs. 15,78,210 was available to it as unabsorbed investment allowance and unabsorbed business loss/depreciation for being set off against the income for the assessment year 1991-92. The Income-tax Officer, however, set off only Rs. 72,560 which represented unabsorbed investment allowance against the income for the assessment year 1991-92. According to him, in the assessment years 1989-90 and 1990-91 the entire unabsorbed business losses/depreciation and the investment allowance had been adjusted, save and except the investment allowance of Rs. 72,560 which a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubmitted that even though in the assessment years 1989-90 and 1990-91 the assessee's income was determined under section 115J of the Act at 30 per cent of its book profits, there has to be necessarily a computation of the income in accordance with the usual provisions of the Act and in such computation past losses and allowances have to be adjusted and whatever remains unadjusted would be permitted to be carried forward to the subsequent years and adjusted, wherever possible. It was argued by Mr. Bajoria that in any event where two views are possible on the interpretation or impact of a particular statutory provision, the view which favours the tax-payer should be adopted. In the course of his arguments Mr. Bajoria also cited certain authorities which we will presently refer to. 5. On the other hand, the ld. representative for the department strongly supported the orders of the revenue authorities. He contended that the fiction contained in section 115J should not be limited to the determination of the assessee's income at 30 per cent of its book profits but should be given full effect and if full effect is given to the fiction, it would be logical also to deem that all the past ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ------------- Total income : NIL ------------- Income as per 115J(1) of the Act, ie. 30 per cent of the book profit Rs. 6,73,920 The contention of the assessee is that to the extent of the income taxed under section 115J(1), there has been no adjustment of the investment allowance. Thus, there has been an adjustment of the investment allowance to the extent of Rs. 21,99,039 (-) Rs. 6,73,920 = Rs. 15,25,119. Therefore, according to the assessee, out of the investment allowance of Rs. 22,71,599, only a sum of Rs. 15,25,119 has been adjusted, leaving a balance of Rs. 7,46,480 to be carried forward to the subsequent years. This figure can be taken as 'B'. 8. Thus, according to the assessee, it is eligible to carry forward the following two amounts to the assessment year 1991-92 : Unabsorbed losses/depreciation* Rs. 8,23,730** Unabsorbed investment allowance (figure marked 'B' above) Rs. 7,46,480 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 115J(1) is stated to operate " notwithstanding any thing contained in any other provision of this Act ". Whereas Mr. Bajoria submitted that the function of the non obstante clause is only for the limited purpose of deeming the total income of the company to be an amount equal to 30 per cent of its book profits and nothing more, the argument of the Ld. Departmental Representative, supported by the orders of the departmental authorities, was that all other provisions of the Income-tax Act are to be ignored while applying the provisions of section 115J. Those provisions include the provisions for carry forward of the losses and allowances and in view of the non obstante clause, these provisions also have to be ignored. These provisions, according to the Ld. Departmental Representative have to be applied only for the limited purpose of finding out whether the total income as computed under the various provisions of the Act is below 30 per cent of the book profits of the company. Once this exercise is done, all those provisions should be given the go-by, if it is found that the total income is below 30 per cent of the book profit. Admittedly, the total income computed under the prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -company would also lose its right to have the aforesaid allowances and losses for that year determined and carried forward to the subsequent years. As stated earlier, if that is the result even in respect of the year in which section 155J(1) is applied, the position would be " a fortiori " as contended by Mr. Bajoria, for the years where section 115J had no application. In the present case, the losses and depreciation had been computed for the assessment years 1983-84, 1986-87 and 1987-88. Section 115J was not applicable in those years. When these losses and allowances were computed, a corresponding right enured in the assessee, and such right was, in our opinion, rightly described by Mr. Bajoria as a vested right. Such a vested right cannot, in our opinion, be taken away without express sanction of the law. We were not referred to any such express words in section 115J authorising the taking away of the right. It was argued on behalf of the department that express words for this purpose are not necessary and once sub-section (1) of section 115J provided for the deeming of the total income of the assessee-company to be an amount equal to 30 per cent of the book profits, by implica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 115J itself was introduced as a measure of equity, solely for the purpose of extracting tax from a category of assessees who, even while earning substantial profits, were not obliged to pay tax in view of the concessions and benefits availed of by them. The purpose of the section was thus limited to extracting tax for the particular year in which the circumstances stated in sub-section (1) existed. We are not prepared, under these circumstances and having regard to the judicial pronouncements on the scope of the legal fiction, to extend the same and hold, by putting words which are not there, that where the provisions of section 115J(1) are applied, there is an end to the adjustment of the past losses and allowances and further that there is no revival of the losses and allowances in a year where the provisions of section 115J are not attracted. To hold so would be to treat the assessee's vested right in a cavalier fashion not authorised by the Legislature. 11. Turning now to the contention of the revenue that since sub-section (1) of section 115J opens with a non obstante clause, the other provisions of the Act are automatically ruled out or excluded, we are afraid that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isions of section 115J have been applied. 12. In the present case, the calculations made by the assessee show that to the extent of the income assessed under section 115J(1) of the Act for the assessment years 1989-90 and 1990-91, the assessee is prepared to concede that set off has been actually allowed. It is only with regard to the balance that the assessee claims set off in the assessment year 1991-92. We have already extracted the assessee's computation. The computation makes this position clear. In accordance with the same, the assessee would be entitled to have the following allowances and losses brought forward from the earlier assessment years set off against the income for the assessment year under appeal : 1. Unabsorbed losses/allowances relating to the assessment years 1983-84, 1986-87 and 1987-88 Rs. 8,23,730 2. Unabsorbed investment allowance relating to the assessment year 1990-91 Rs. 7,46,480 13. It may be added here that in any case the investment allowance relating to the assessment year 1990-91, to the extent to which it remains unabsorbed has to be absorbed against the income for the assessment year 1991-92, in accordance with section 115J(2). This s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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