1992 (5) TMI 74 - AT - Income Tax

Summary

Issues:
- Carry forward of unabsorbed losses under section 115J of the Income-tax Act for the assessment year 1988-89.

Detailed Analysis:

The appeal before the Appellate Tribunal ITAT GAUHATI pertained to the assessment year 1988-89 and focused on the carry forward of unabsorbed losses under section 115J of the Income-tax Act. The controversy arose when the Assistant Commissioner of Income-tax computed the assessee's income at Rs. 2,55,866, which was set off against brought forward losses of Rs. 4,87,417 from the previous assessment year, resulting in a carry forward loss of Rs. 2,31,551. The main contention revolved around whether the amount charged to tax under section 115J should be deducted from the brought forward losses.

The Assistant Commissioner applied the provisions of section 115J, which deals with special provisions relating to companies, and computed the book profit at Rs. 2,48,158. He then considered 30% of the book profit as deemed total income chargeable to tax. The assessee challenged this computation before the Commissioner of Income-tax (Appeals) and argued that the amount charged to tax under section 115J should not be adjusted against the brought forward losses. The CIT (A) allowed relief to the assessee based on the interpretation of section 115J(2) of the Act.

During the appeal before the Tribunal, the Departmental Representative contended that the CIT (A) misinterpreted section 115J(2) and provided references to legal commentaries and a decision of the Income-tax Appellate Tribunal. On the other hand, the counsel for the assessee supported the CIT (A)'s order, emphasizing that the amount charged to tax cannot be treated as adjusted against losses. The Tribunal analyzed the provisions of section 115J and the legislative intent behind it, noting that while the legal fiction under section 115J(1) deems a certain amount as total income, section 115J(2) saves the application of sub-section (1) to provisions related to carry forward and set off of losses.

Ultimately, the Tribunal held that the legislative intent behind section 115J(2) was clear and saved the provisions related to carry forward and set off of losses from the impact of section 115J(1). Therefore, the Tribunal set aside the CIT (A)'s order and restored the decision of the Assistant Commissioner, allowing the Revenue's appeal.