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TMI Blog2010 (10) TMI 33X X X X Extracts X X X X X X X X Extracts X X X X ..... ates. 1. In this appeal, two questions of law, touching upon the interpretation which is to given to the Explanation below Section 115JB Clause (iii) of the Income Tax Act (hereinafter referred to as "the Act‟), arise for consideration. Before we reproduce the exact questions, which were formulated while admitting the appeal, we deem it proper to dig into the relevant events that occurred leading to the said questions. 2. The assessee company/respondent is engaged in the business of manufacture and sale of injection moulded plastic parts, stamping parts/moulds and job work. The assessee filed its return of income for the Assessment Year 2002-03, relevant to the Financial Year 2001-02, declaring "NIL" taxable income. This return was filed on 30.10.2002 along with statutory Audit Report and audited balance sheet and profit and loss account. The return was also accompanied by a report in Form No.29 B dated 22.10.2002 from an Accountant, certifying the book profits to be "NIL" in terms of Minimum Alternate Tax (MAT) provisions of Section 115JB of the Act. This return was selected for scrutiny and notice under Sections 143(2) and 142(1) was served upon the assessee. Revised ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , by whatever name called [other than a reserve specified under Section 33AC]; or (c) the amount or amounts set aside to provisions made for meeting liabilities, other than ascertained liabilities; or (d) the amount by way of provision for losses of subsidiary companies; or (e) the amount or amounts of dividends paid or proposed; or (f) the amount or amounts of expenditure relatable to any income to which [section 10 (other than the provisions contained in clause (38) thereof) or Section 11 or section 12 apply; or (g) the amount of depreciation, (h) the amount of deferred tax and the provision therefore, (i) the amount or amounts set aside as provision for diminution in the value of any asset, . If any amount referred to in clauses (a) to (i) is debited to the profit and loss account, and as reduced by, - (i) the amount withdrawn from any reserve or provision (excluding a reserve created before the 1st day of April, 1997 otherwise than by way of a debit to the profit and loss account), if any such amount is credited to the profit and loss account: Provided that where this section is applicable to an assessee in any previous year, the amount withd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al General Meeting on 25th day of September, 2001. A petition was filed in this Court for approval and confirmation. On 18.02.2002 in the said petition being C.P. No.345/2001, orders were passed by the High Court, confirming the reduction of capital and approving the Minutes, which reduction was subsequently registered with the Registrar of Companies, New Delhi on 26.03.2002. 6. By virtue of this reduction of capital, the accumulated losses were wiped out. The assessee vide additional information pursuant to Part IV of Schedule VI of the Companies Act, 1956 (where balance sheet abstract and company"s general profile is given) reported NIL accumulated losses. 7. The position which emerges from the aforesaid is that as on 31.03.2001, there were accumulated losses to the tune of Rs.34,67,03,948 which were brought forward in the relevant Assessment Year, i.e., on 01.04.2001. However, on the close of this Financial Year, i.e., 31.03.2002, there were no accumulated losses as these were reduced to "NIL" due to the reduction of share capital. 8. In the Assessment Year under consideration, i.e., 2002-03 (corresponding to Financial Year 2001-02), the assessee had earned a net pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isions, intend and purposes of the Act in this regard. The specious argument of the assessee that since the accumulated losses at the close of the previous year as at (sic. on) 31.3.2001 were brought forward in the beginning of the previous year relevant for the assessment year under consideration, set off should be allowed is completely mis-directed. The profit and gains as well as losses are reckoned at the end of the previous year and not at the beginning of the year. Would the assessee say that it could ascertain profits at the beginning of the year? Thus this ground is only self serving and devoid of any merit. 3.7 Intention of the Legislature has been stressed upon by the assessee company to justify its claim of set off. In this context, it is to be stated that the intention of the legislature requires to be probed where there are ambiguities in the legislation. So far as Section 115JB is concerned, it is a stand-alone extra ordinary provision whose unambiguous object is to levy tax at a specified percentage of the "Book Profits" which is net profit as per profit and loss account prepared in accordance with the provisions of Part II and III of Schedule VI of the Companies Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses of sec. 115JB. The book profit can be known only when the books are written, i.e. on the last day of the year. Although the brought forward loss may be quantified on the first day of the year it is only at the end of the accounting period that such loss can be adjusted. The set-off can be effectuated only after ascertainment of the profit. If, in between the first day and the last day of the accounting period, the loss gets liquidated, noting (sic. nothing) would be left over for set-off against the profit. Hence, in my opinion, the A.O. was fully justified in not allowing the adjustment of brought forward losses, since the losses had been liquidated during the course of the year and nothing was left over, being available for set-off. Accordingly, the disallowance is sustained." 11. The Income Tax Appellate Tribunal (hereinafter referred to as "the Tribunal") in its impugned decision while overturning the opinion of the AO, has preferred to accept the contention of the assessee, holding the view that the expression "losses brought forward" would mean the losses which existed as on the last date of the previous Financial Year and brought forward in the current Financial Year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of MAT?" 13. Mr. C.S. Aggarwal, learned Senior counsel appearing for the assessee, justified the approach adopted by the learned Tribunal and argued that insofar as questions (a) and (b) are concerned, from a bare look at the statutory provisions contained in the Explanation under Section 115JB, Clause (iii), it is evident that the same provides that it is the amount of loss brought forward or unabsorbed depreciation, whichever is less as per the books of account, it is to be reduced from the book profit. Thus, whether such brought forward losses have been liquidated or not is of no consequence, since such brought forward losses as determined are to be reduced under Explanation to Clause (iii) of Section 115JB (2) of the Act from the book profit as reflected in the profit and loss account prepared. He supplemented this argument by submitting that the figure of book profits is one as is declared as per profit and loss account. From the said book profit, the assessee is to set off the amount of loss brought forward. The concept of "brought forward losses" is well established and is that such losses, as have been brought forward from the preceding year. The profit and loss account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing that the intention of legislature is to be judged from the language used in the legislation. If the language is plain and unambiguous, effect is to be given without going behind the wisdom of the legislature and also regardless of the result. It is also a cardinal principle of interpretation of fiscal statutes that they should be construed strictly (see Commissioner of Income Tax Vs. Kasturi, 237 ITR 24(SC). So long as the provision is free from ambiguity, there is no need to draw an analogy (see Rajasthan SEB Vs. DCIT, 200 ITR 434). The legal position is beautifully summed up by the Supreme Court in the case of Commissioner of Customs and Central Excise Vs. Hongo India (P) Ltd. in the following words: "2. At the cost of some repetition, we may notice that the provisions of Sections 23 and 24 of the Act have been enacted by the Legislature with certain objects in mind. The intention of the Legislature is an important factor in relation to interpretation of statutes. The statue law and the case law go side by side and quite often the relationship between them is supplementary. In other words, interpretation is guided by the spirit of the enactment. Interpretation can be litera ..... X X X X Extracts X X X X X X X X Extracts X X X X
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