1993 (12) TMI 84 - AT - Income Tax

Summary

Issues Involved:
1. Scope of applicability of section 115J(2) regarding determination of unabsorbed loss, depreciation, etc., to be carried forward.
2. Determination of Written Down Values (WDVs) for subsequent years.
3. Carry forward of business loss, unabsorbed depreciation, unabsorbed investment allowance, etc.
4. Interest on interest in the case of M/s. Widia (India) Ltd.

Detailed Analysis:

1. Scope of Applicability of Section 115J(2):
The primary issue in the appeals is the scope of applicability of section 115J(2) concerning the determination of unabsorbed loss, depreciation, etc., to be carried forward. The Commissioner (Appeals) directed that the amounts of loss, unabsorbed depreciation, unabsorbed investment allowance, etc., brought forward from preceding years should be carried forward in the exact manner to the next year. The department contended that the language of section 115J(2) is clear and mandates that for determining the amounts to be carried forward, it should be presumed as if the provisions of section 115J(1) did not exist. The Tribunal agreed with the department, stating that the determination of losses and allowances should be done in the normal way, as if no order under section 115J(1) was passed.

2. Determination of Written Down Values (WDVs):
The Commissioner (Appeals) directed that the opening WDV for the next year should be taken as the closing WDV of the assets for the immediately preceding year. The Tribunal, however, disagreed, stating that the depreciation must be considered as actually allowed in the current year, and the resultant figures should be carried forward to the next year. The Tribunal emphasized that the scheme for levying tax under section 115J(1) is an artificial process superimposed on the regular process of determining the total income of the assessee in the usual manner.

3. Carry Forward of Business Loss, Unabsorbed Depreciation, Unabsorbed Investment Allowance, etc.:
The Commissioner (Appeals) held that the amounts of loss, unabsorbed depreciation, unabsorbed investment allowance, etc., for the current year should not be carried forward. The Tribunal disagreed, stating that theoretically, the current year's business losses, unabsorbed depreciation, unabsorbed investment allowance, etc., are required to be carried forward to the subsequent year. However, since no appeal was preferred by the assessees on this finding, the Tribunal did not order for the allowance of such business losses, current year's depreciation, etc., in the present cases.

4. Interest on Interest in the Case of M/s. Widia (India) Ltd.:
The department contended that the Commissioner (Appeals) erred in directing the Assessing Officer to allow the assessee interest on interest. The Tribunal agreed with the Commissioner (Appeals) that there was no justification on the part of the department to deny the benefit of some portion of refund already declared as interest in a later modification order. The Tribunal upheld the decision of the Commissioner (Appeals) and dismissed the departmental ground on this issue.

Conclusion:
The Tribunal allowed the departmental appeals to the extent of reversing the Commissioner (Appeals)'s decisions on the determination of WDVs and the carry forward of losses and depreciation. However, the Tribunal upheld the decision of the Commissioner (Appeals) regarding the interest on interest issue in the case of M/s. Widia (India) Ltd.