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TMI Blog2002 (7) TMI 229X X X X Extracts X X X X X X X X Extracts X X X X ..... O. While disallowing the claim of the assessee, the AO made following observations: "What the assessee is therefore, asking is that what amount the assessee has paid under s. 115J in earlier years, the benefit of that should be allowed in carry forward of loss/depreciation etc. The contention of the assessee is not acceptable. Sec. 115J stipulates special provision relating to certain companies by which the total income of a company is deemed to be equal to 30 per cent of its book profit. This is the deeming provision and in no way affect the computation of total income of assessee under this Act. Sec. 115J starts with non obstante clause and it does not affect the computation of total income under the Act but only provides chargeability of tax on due total income. It does not amount to say that the total income to the assessee in the Act is computed on such figures at 30 per cent of book profit. The determination of the amount in relation to the previous year to be carried forward in subsequent years under the provisions of the Act are not effected by this due income. It is otherwise to be deemed specially stipulated in sub-s. (2) of s. 115J. Therefore, the assessee cannot be al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... J would affect the determination of accounts to be carried forward to subsequent years. Thus, it is unambiguously provided that deeming provisions of s. 115J(1) is confined to computation of income available to tax for the relevant previous year and cannot be imparted to influence working of amounts to be carried forward to subsequent years. Mrs. Kapoor further submitted that s. 115J involves two processes : Firstly, the assessing authority determines the income under the provisions of the IT Act and if it is less than 30 per cent of the book profit, the latter is deemed to be income chargeable to tax in terms of fiction created by s. 115J(2) of the Act. Sub-s. (2) of s. 115J is the saving clause and it permits determination of amounts to be carried forward uninfluenced by provisions of sub-s. (1). In absence of sub-s. (2) that a specific direction to ignore provisions of sub-s. (1) a deeming fiction under sub-s. (1) would have put an end to any claim of carry forward of losses etc. 6. Learned Departmental Representative further submitted that the view point canvassed by the assessee and sustained by the CIT(A) tantamounts to treating the tax paid for deemed income as a kind of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 999) 239 ITR 611 (Gau) and of Calcutta High Court in the case of CIT vs. Singh Alloys Steel Ltd. (2002) 172 CTR (Cal) 144 : (2002) 253 ITR 650 (Cal). Learned Departmental Representative has submitted that in these judgments Circular No. 495 of CBDT and the provisions of s. 115JAA were neither cited nor considered by the Hon ble Courts. Moreover, both the Courts were not apprised of the view already taken by the Andhra Pradesh High Court in its judgment in the case of Suryalatha Spinning Mills Ltd. vs. Union of India (1997) 223 ITR 713 (AP) in which provision of s. 115J were analysed by the Hon ble Court exhaustively after having considered the Circular No. 495 of CBDT. 9. Learned Departmental Representative further placed reliance upon the order of the Ahmedabad Bench in the case of Gujarat Petrosynthese Ltd. vs. Dy. CIT (2001) 71 TTJ (Ahd) 349 : (2001) 76 ITD 257 (Ahd) in which the Tribunal has adopted the view taken by the Hon ble Andhra Pradesh High Court in the case of Suryalatha Spinning Mills Ltd. and finally held that such amount of unabsorbed depreciation and investment allowance should be carried forward to subsequent year/years as could have been determined under regu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The CIT(A) has accepted the claim of the assessee having simply relied upon the Tribunal s order in the case of Motor General and Finance Co. A copy of the order of the Tribunal in the case of MFG Ltd. is placed before us and from its perusal, we find that the Circular No. 495, dt.22nd Sept., 1987of the CBDT through which CBDT has made its effort to clarify the scope of s. 115J with regard to carry forward of unabsorbed losses and investment allowance etc. was neither referred nor considered by the Tribunal. Even the judgment of the Andhra Pradesh High Court in the case of Suryalatha Spinning Mills were not brought to the notice of the Tribunal. Recently, the Ahmedabad Bench of the Tribunal has taken a contrary view after having considered the CBDT Circular and judgment of the Andhra Pradesh High Court. While dealing with the issue the Ahmedabad Bench has also considered the judgment of other High Courts in which contrary view was taken. 12. Keeping in view the controversial findings of different Benches of the Tribunal in different High Courts, we feel it proper to re-examine the issue again in the light of aforesaid various judicial pronouncements. Before adverting to the impu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by, (i) the amount withdrawn from reserves (other than the reserves specified in s. 80HHD) or provisions, if any such amount is credited to P L a/c: Provided that, where this section is applicable to an assessee in any previous year (including the relevant previous year), the amount withdrawn from reserves created or provisions made in a previous year relevant to the assessment year commencing on or after the 1st day of April, 1988, shall not be reduced from the book profit unless the book profit of such year has been increased by those reserves or provisions (out of which the said amount was withdrawn) under this Explanation; or (ii) the amount of income to which any of the provisions of Chapter III applies, if any such amount is credited to the P L a/c; or (iii) the amounts (as arrived at after increasing the net profit by the amounts referred to in cls. (a) to (f) and reducing the net profit by the amounts referred to in cls. (i) and (ii) are attributable to the business, the profits from which are eligible for deduction under s. 80HHC or s. 80HHD; so, however, that such amounts are computed in the manner specified in sub-s. (3) or sub-s. (3A) of s. 80HHC or sub-s. (3) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t year or years under the provisions of sub-s. (2) or cl. 2 of sub-s. (1) of s. 72 or 73 or 74 or sub-s. (3) of 74A or sub-s. (3) of s. 80J. 14. The Tribunal has further observed that the proper way to harmonise sub-ss. (1) and (2) is to read sub-s. (1) as being restricted to the computation of total income under the IT Act before setting off unabsorbed loss and depreciation of earlier year. If the loss is wholly set off from the income of the current year so as to bring the income at nil, the words determination of the amount to....... to be carried forward in sub-s. (2) could be rendered meaningless. In case the interpretation is adopted so as to see set off of the entire unabsorbed investment allowance in the year as correct, then there was no need for such a provision as has been incorporated under sub-s. (2) because such provision is in-built in the scheme of the IT Act and further, the aforesaid interpretation would render the unabsorbed investment allowance to become a dead loss. The Tribunal has finally opined that the investment allowance as claimed by the assessee to the extent of 30 per cent of the book profit on which it is required to pay tax and remaining amount of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ious year relevant to the assessment year after 1st April, 1988, is less than 30 per cent of their book profits, the total income of such companies chargeable to income-tax for the relevant previous year is treated as income equal to 30 per cent of such book profits and is taxed accordingly. It also provides for certain adjustments by way of adding amounts and granting deductions for computing the chargeable income under s. 115J(1). Sub-s. (2) provides that determination of the amounts in relation to the relevant previous year to be carried forward to the subsequent year or years will have to be made unaffected by the provisions in sub-s. (1) of s. 115J. This provision involves two processes : First the assessing authority has to determine the income of the company under the provisions of the IT Act, and secondly, the book profit has to be worked out in accordance with the Explanation below s. 115J(1A), then it will have to be seen whether the total income determined under the first process is less than 30 per cent of the book profit; if so, sub-s. (1) would be invoked and the total income of such a company chargeable to income-tax for the relevant previous year shall be equal to 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me prescribed under the said provisions and there is no provision to retax the same income. The right to carry forward losses and unadjusted allowances as kept intact by sub-s. (2) of s. 115J merely because a sum equal to the income determined as taxable under sub-s. (1) is not treated as unabsorbed loss, etc. which under no provision of the Act can be so treated. It cannot be said that there is double taxation. Even if there is double taxation, that would not per se render the provisions invalid. We have also examined the object of the introduction of this new provision from the budget speech of the then Finance Minister reported at (1987) 165 ITR 14 (St) wherefrom it is clear that this provision was inserted to bring the zero-tax companies within the income-tax net. Under this new provision, the zero-tax company has to pay at least 30 per cent of its book profit computed as per Companies Act and in terms of Explanation to sub-s. (1A). 16. We have also examined the order of the Tribunal in the case of Gujarat Petrosynthese Ltd. vs. Dy. CIT which was also referred before us during the course of hearing and from its perusal, we find that similar issue was examined by the Ahmedabad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble to tax. The expression 'determination of the amounts in relation to previous year to be carried forward to the subsequent year or years under the provisions of sub-s. (2) of s. 32, used in s. 115J(2) clearly envisages the determination of carried forward unabsorbed depreciation worked out by the AO in relation to assessment years under consideration and carrying forward of the said amounts to the subsequent year or years uninfluenced and unaffected by the operation of deeming fiction of sub-s. (1). When the words of a statute are clear, plain or unambiguous, i.e., they are reasonably susceptible to only one meaning, the Courts are bought to give effect to that meaning irrespective of consequences. Since the deeming fiction created under sub-s. (1) does not extend to determination of the carried forward unabsorbed depreciation, losses, etc. as explicity and unequivocally provided under sub-s. (2), there is no ambiguity in the provisions. The argument that the interpretation adopted by the AO in carrying forward the unabsorbed deprecation, etc. as determined under the regular provisions, without considering the fact that the assessee has been subjected to tax on notional income l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nly do violence to the express language of the enactment but would also bring manifestly absurd results. Therefore, only such amounts of unabsorbed depreciation, investment allowances, etc. can be carried forward to the subsequent year or years as would have been determined under the regular provisions of the Act. Therefore, view taken by the AO was to be upheld." 17. In the case of Kwality Biscuit Ltd. vs. CIT (2000) 159 CTR (Kar) 316 : (2000) 243 ITR 519 (Kar) their Lordships of the Karnataka High Court have observed after following the judgment of Surana Steel (P) Ltd. vs. Dy. CIT (1999) 153 CTR (SC) 193 : (1999) 237 ITR 777 (SC) that the amounts to be carried forward like unabsorbed depreciation allowance and business loss from assessment year to which the provisions of s. 115J are applied, should be those which were available to the assessee as at the commencement of the previous year relevant to the said assessment year, unaltered by making an assessment under s. 115J, for that assessment year and carried forward amounts like unabsorbed depreciation, investment allowance and business loss should be reckoned as if a regular assessment is made under s. 143(3)/144 of the Act f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee should not suffer and that has been taken care of by allowing the loss which the assessee has suffered on account of not being allowed the deduction which the assessee is entitled to under the Act. That has to be ascertained on allowing all these deductions and whatever the net loss, that has to be allowed to be carried forward and set off against the income of the subsequent year or years. 19. We have also examined the various judgments referred to by the assessee on the point of interpretation of fiscal laws and we are of the considered opinion that whenever no ambiguity is noticed, in the language of a particular section, it should be strictly interpreted as held by the apex Court in the case or CIT vs. Plantation Corpn. of Kerala Ltd. in which their Lordships have categorically held that so long as there is no ambiguity in the statutory language, resort to any interpretative process to unfold the legislature intent becomes impermissible. Sec. 115J was introduced by the Finance Act w.e.f.,1st April, 1988, to charge income-tax on zero-tax companies, the companies which declares the nil income or in loss though earn sufficient income and declare substantial dividend ..... 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