1996 (6) TMI 110 - AT - Income Tax

Summary

Issues Involved:
1. Carry forward of depreciation under section 32(2).
2. Charging of interest under sections 234B and 234C.

Detailed Analysis:

1. Carry Forward of Depreciation under Section 32(2):

The primary dispute in this appeal revolves around the adjustment of book profit of Rs. 18,43,065. The assessee contends that this book profit, deemed as total income and taxed under section 115J, should be excluded from its income before setting off depreciation. The assessee argues that depreciation should be set off against the balance income of Rs. 1,29,04,771, citing the decision of the Income-tax Appellate Tribunal, Madras Bench, in the case of Fab Exports (P.) Ltd v. ACIT [1996] 56 ITD 132. The assessee's counsel emphasizes that the provisions of section 115J are intended to ensure a minimum tax liability, not to impose an additional burden by taxing 30% of book profit and also adjusting losses from that profit, which would result in double taxation.

On the contrary, the departmental representative argues that the total income is computed first under the normal provisions of the Income-tax Act. Only if this income is less than 30% of the book profit, the latter is deemed as total income. Once this is done, there is no provision to deduct this 30% from other income before considering depreciation. The representative further asserts that sections 32(2) and 72(2) are not subject to section 115J(1), and section 80VVA is not analogous to section 115J.

Upon consideration, the Tribunal concludes that section 115J(2) ensures that the right to carry forward unabsorbed depreciation, loss, etc., is not affected by section 115J(1). This means that the right to carry forward is determined before applying section 115J. The Tribunal rejects the assessee's contention that taxing 30% of book profit and setting it off against depreciation amounts to double taxation. Instead, it clarifies that section 115J(2) allows carry-forward and set-off despite the assessment of positive income under section 115J(1).

The Tribunal also addresses the assessee's reliance on the Fab Export (P.) Ltd case, noting that the issue in that case did not pertain to a year when section 115J was applicable. Therefore, the Tribunal finds no merit in the assessee's argument that 'income chargeable to tax' in section 32(2) excludes income actually charged.

2. Charging of Interest under Sections 234B and 234C:

The judgment does not provide a detailed analysis of the issue regarding the charging of interest under sections 234B and 234C. However, it is implied that the Tribunal's decision to dismiss the appeal encompasses this issue as well, given that the primary contention revolves around the adjustment of book profit and the carry-forward of depreciation.

Conclusion:

The Tribunal dismisses the assessee's appeal, affirming that section 115J(2) ensures the right to carry forward unabsorbed depreciation and losses is not affected by the provisions of section 115J(1). The Tribunal finds no merit in the contention that taxing 30% of book profit and setting it off against depreciation results in double taxation, and it rejects the comparison with section 80VVA. The appeal is dismissed in its entirety.