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TMI Blog2003 (1) TMI 233X X X X Extracts X X X X X X X X Extracts X X X X ..... usted against the assessee's income as computed under normal provisions of the Income-tax Act. He held that unabsorbed investment allowance will not be carried forward since section 115J(2) provided that carry forward of unabsorbed loss, unabsorbed investment allowance etc. would remain unaffected by the provisions of section 115J( 1 ).The assessee carried the matter to the CIT(A). The assessee's grievance was that with the income assessed at Rs. 47,56,772, brought forward unabsorbed investment allowance remained unadjusted to the extent of Rs. 8,17,544 as per the calculations given below :- Rs. Normal Course Under section 115J Total income 94,15,504 94,15,504 Less: Investment allowance allowed 54,76,276 46,58,732 Net income assessed 39,39,228 47,56,772 Balance unabsorbed investment allowance to be elf to subsequent years (54,76,276 - 46,58,732) = 8,17,544 4. The CIT(A) accepted the assessee's contention and allowed the assessee's claim. The Revenue is in appeal before us against the direction of the CIT(A). PART? Q MAY 19. MAY 25. 2004 . 10 r 2004 ] Dy. CITv. Borosil Glass Works Ltd. (Mum) (TM) 195 ~ 5. The ld. DR stated before us that on the interp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3096 of the book profit. We would, respectfully follow the ratio laid down in the aforesaid two decisions of the Hon'ble Andhra Pradesh High Court and Hon'ble Karnataka High Court, the Revenue's appeal is ! 1. 93 Taxman 310. 2. [2003] 126 Taxman 294. PART 7 0 MAY 19- MAY 25, 2004 . 11 196 Income-tax Tribunal Decisions [Vol. 89 accordingly allowed and the direction of the CIT(A) in regard to the carry forward of unabsorbed investment allowance is hereby cancelled. 8. In the result, the appeal of the Revenue is allowed. Mukul Shrawat, J.M.- 9. I have carefully gone through the order proposed by my learned Brother. On careful consideration of the matter I could not persuade myself to agree with the finding given by the learned Accountant Member for the reasons given below: 10. Facts of the case which I have gathered from an order passed under section 154 of the Income-tax Act for the assessment year under consideration i.e., 1988-89 is that the Assessing Officer has found some error in the computation made under section 115J by the assessee of Rs. 35,74,822. According to the Assessing Officer if the correct income would be taken then 3096 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bsequent years. . , 13. Learned Brother is of the view that there is no scope of doubt about the legislative intent underlying that the provisions of section 115J(2). In his words, "a plain reading of section 115J(2), there is no doubt that the provisions of section 115J would leave unaffected the amounts of .unabsorbed losses, ,unabsorbed depreciation and other unaJ: sorbed reliefs which are determined to be carried forward as per the.normal computation under the other provisions of LT. Act". A Departmental Circular No. 495 dated 22-9-1987 was also quoted. Finally, he has relied upon the decision of Hon'ble Andhra Pradesh High Court in the case of f)uryalatha Spinning Mills Ltd. (supra) and the decision ofBon'ble Karnataka High Court in the case of Widia (India) Ltd. (supra). 14. On the other hand, I am of the view that section 115J does not provide that 3096 of the deemed income whic4 is chargeable to tax s,hall also be liable for adjustment against allowances or losses which have been carried forward. Section 115J(2) merely provides that the provisions of sub-section (1) shall not affect the determination of the amount relating to the relevant previous year to be carried f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ject to tax. Therefore, by plain analogy, for all practical purpose, that computation of income should be kept in mind on which tax is levied and not that computation which is not subject to tax. Therefore, for subsequent years such figures should be carried forward on which after adjustment tax has been paid. Hence,.the assessee should be permitted to carry forward unabsorbed losses or unadjusted allowances of an amount equal to the taxed income. This opinion of mine gets support from the following orders:- (I) Lallacherra Tea Co. (P.) Ltd. s case (supra) (il) Karimtharuvi Tea Estate Ltd. v. Dy. CIT[2001] 247 ITR 221 (Ker.) 15. Both the above High Courts have elaborately discussed the provisions of section 11 sJ and came to the conclusion that the amount which was taxed under section 11sJ could not be adjusted against losses which have been carried forward. While deciding this issue the Hon'ble Gauhati High Court has also quoted an example as follows: 1. [2000] 113 Taxman 514. PART? Q MAY 19-MAY 25. 2004 . 14 ~ 2004] Dy. CfTv. Borosil Glass Works Ltd. (Mum) (TM) 199 '. "Let us take a hypothetical example. The income of 'X' company in a particula ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pon. For the relevant assessment year, assessee was originally assessed on an income of Rs. 39,39,228 after allowing deduction for the broughtforward unabsorbed investment allowance of Rs. 54,76,236. Subsequently, it was found that the income assessable under section 115J was Rs. 47,56,772. Assessing Officer rectified the PART? 0 MAYI9-MAY2S,2004 . IS 200 Income-tax Tribunal Decisions [Vol. 89 assessment by resorting to the 154 proceedings. Unabsorbed investment allowance was not allowed to be carried forward by the Assessing Officer, as the entire unabsorbed investment allowance brought forward from earlier years amounting to Rs. 54,76,276 got adjusted against the assessee's income as computed under normal provisions of the Income-t,ax Act. 3. The core of dispute was apropos the adjustment of the. balance figure of investment allowance of Rs. 8,17,554, ie., difference between the investment allowance allowed in normal course and as allowed under section 115J. According to the assessee, balance figure of investment allowance of Rs. 8,17,544 should be allowed to be carried forward to the subsequent years. CIT(Appeals) agreed with the contention of the assessee. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (supra). 6. It was held by the Hon'ble Supreme Court that the scheme under section 115J for levying tax by considering 3096 of the book profits to be the deemed total income is an artificial process superimposed on the regular process of determination of the total income of the assessee in the usual manner. This section provides two stages, namely, (a) computation of income of the assessee under the IT Act in respect of the previous year, and (b) if the income as computed under the Act of that previous year is less than 3096 of its book profit, then the deemed total income of the assessee chargeable to tax for the previous year would be equal to 3096 of the book profit. Assessee is not required to pay tax on the figure of assessable income after deducting the amounts permissible under that Act, but on that account it cannot be said that the deductions are not taken into account. If the deductions had not, in fact been allowed, the assessee would not have had an assessable income less than 3096 of its book profits entitling it to pay tax only on 3096 of its book profits. In deeming the total income to be 3096 of the profits, the deductions claimed are not ignored. These are neces ..... X X X X Extracts X X X X X X X X Extracts X X X X
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