9911796707
TMI Blog1995 (5) TMI 52X X X X Extracts X X X X X X X X Extracts X X X X ..... ; Rs. 13,28,917 1987-88 Rs. 14,45,356 ------------- Total : Rs. 29,28,146 -------------- The assessment for the assessment year 1989-90 was made by invoking the provisions of section 115J and the assessee's total 'income in accordance therewith was determined at Rs. 9,74,816. For the assessment year 1990-91 also the total income was similarly determined at Rs. 6,73,920. The provisions of section 115J were omitted with effect from 1-4-1991, that is from the assessment year 1991-92, which is the year under appeal. In the year under appeal while completing the assessment under section 143(3), the assessee claimed that an amount of Rs. 15,78,210 was available to it as unabsorbed investment allowance and unabsorbed business loss/depreciatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te which are missing. He contended that section 115J provided only for one fiction for determining the total income of a company and the section did not contain a second fiction that if the total income is so computed, the allowances and losses of the past years which were available to the assessee for being set off in the subsequent years would also be deemed to have been allowed against the income fictionally determined. Mr: Bajoria, therefore, submitted that even though in the assessment years 1989-90 and 1990-91 the assessee's income was determined under section 115J of the Act at 30 per cent of its book profits, there has to be necessarily a computation of the income in accordance with the usual provisions of the Act and in such computation past losses and allowances have to be adjusted and whatever remains unadjusted would be permitted to be carried forward to the subsequent years and adjusted, wherever possible. It was argued by Mr. Bajoria that in any event where two views are possible on the interpretation or impact of a particular statutory provision, the view which favours the tax-payer should be adopted. In the course of his arguments Mr. Bajoria also cited certain auth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p; Total income : NIL ------------- Income as per 115J(1) of the Act that is 30 per cent of the book profit Rs. 9,74,816 The contention of the assessee is that to the extent of the income taxed under section 115J(1), there has been no adjustment of the past losses and allowances. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re has been an adjustment of the investment allowance to the extent of Rs. 21,99,039 (-) Rs. 6,73,920 = Rs. 15,25,119. Therefore, according to the assessee, out of the investment allowance of Rs. 22,71,599, only a sum of Rs. 15,25,119 has been adjusted, leaving a balance of Rs. 7,46,480 to be carried forward to the subsequent years. This figure can be taken as 'B'. 8. Thus, according to the assessee, it is eligible to carry forward the following two amounts to the assessment year 1991-92 : Unabsorbed losses/depreciation* Rs. 8,23,730** Unabsorbed investment allowance (figure marked 'B' above) Rs. 7,46,480 &n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... This is the rationale behind the provision. In one sense, the section is not entirely a new concept, since earlier the Income-tax Act contained a similar provision in section 80VVA which was in operation for the assessment years 1984-85 to 1987-88. Be that as it may, the provisions of section 115J(1), contained a fiction to the effect that in the circumstances stated therein, the company would be liable to pay tax on the footing that its total income would be an amount equal to 30 per cent of its book profits. The controversy arises because of the non obstante clause.Section 115J(1) is stated to operate " notwithstanding any thing contained in any other provision of this Act ". Whereas Mr. Bajoria submitted that the function of the non obstante clause is only for the limited purpose of deeming the total income of the company to be an amount equal to 30 per cent of its book profits and nothing more, the argument of the Ld. Departmental Representative, supported by the orders of the departmental authorities, was that all other provisions of the Income-tax Act are to be ignored while applying the provisions of section 115J. Those provisions include the provisions for carry forward of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... argue, as it was done on behalf of the department in the present case, that because the company has been asked to pay tax on 30 per cent of its book profits by applying section 115J(1), it will not be eligible to carry forward the depreciation, investment allowance, business loss, etc., for that year to the subsequent years. It is precisely to put to rest such doubts that sub-section (2) was enacted, in our opinion. It was clarified that no such thing would happen and that the consequence of applying the deeming provisions of sub-section (1) would not be that the assessee-company would also lose its right to have the aforesaid allowances and losses for that year determined and carried forward to the subsequent years. As stated earlier, if that is the result even in respect of the year in which section 155J(1) is applied, the position would be " a fortiori " as contended by Mr. Bajoria, for the years where section 115J had no application. In the present case, the losses and depreciation had been computed for the assessment years 1983-84, 1986-87 and 1987-88. Section 115J was not applicable in those years. When these losses and allowances were computed, a corresponding right enured ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITR 190 at page 198 held, after referring to certain English cases, that a fiction should never be used to work injustice or injury because its operation is to prevent a mischief or remedy an inconvenience that might result from the general rule of law. The Full Bench observed at page 197 of the report that a provision creating a legal fiction should not be interpreted in such a manner as to work injustice to a party, for even when the court steps into the world of legal fantasy, the principle of equity and justice cannot be lost sight of. We have already seen that section 115J itself was introduced as a measure of equity, solely for the purpose of extracting tax from a category of assessees who, even while earning substantial profits, were not obliged to pay tax in view of the concessions and benefits availed of by them. The purpose of the section was thus limited to extracting tax for the particular year in which the circumstances stated in sub-section (1) existed. We are not prepared, under these circumstances and having regard to the judicial pronouncements on the scope of the legal fiction, to extend the same and hold, by putting words which are not there, that where the prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ffect of either taking away the vested right to carry forward the past losses and allowances once and for all. Such a drastic result should not be allowed to follow from the use of the non obstante clause, if regard is had to the scope and purport of the said clause and by reading it in the context of the provision and consistent with the scheme of the section. We are, therefore, unable to accept the contention of the revenue that by the use of non obstante clause there is an end of the assessee's right to adjust the past losses and allowance in a year where the provisions of section 115J have been applied. 12. In the present case, the calculations made by the assessee show that to the extent of the income assessed under section 115J(1) of the Act for the assessment years 1989-90 and 1990-91, the assessee is prepared to concede that set off has been actually allowed. It is only with regard to the balance that the assessee claims set off in the assessment year 1991-92. We have already extracted the assessee's computation. The computation makes this position clear. In accordance with the same, the assessee would be entitled to have the following allowances and losses brought forwar ..... X X X X Extracts X X X X X X X X Extracts X X X X
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