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TMI Blog1995 (5) TMI 52X X X X Extracts X X X X X X X X Extracts X X X X ..... -------------- 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/depreciation for being set off against the income for the assessment year 1991-92. The Income-tax Officer, however, set off only Rs. 72,560 which represented unabsorbed investment allowance against the income for the assessment year 1991-92. According to him, in the assessment years 1989-90 and 1990-91 the entire unabsorbed business losses/depreciation and the investment allowance had been adjusted, save and except the investment allowance of Rs. 72,560 which alone could be set off against the income for the year under appeal. He, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee'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 authorities which we will presently refer to. 5. On the other hand, the ld. representative for the department strongly supported the orders of the revenue authorities. He contended that the fiction contained in section 115J should not be limited to the determination of the assessee's income at 30 per cent of its book profits but should be given full effect and if full effect is given to the fiction, it would be logical also to deem that all the past losses and allowances have been taken care of and the income that is fictio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng 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 ------------ Total income : Rs. 15,78,210 ------------- *(figure marked 'A' above) " Though the correct figure is Rs. 10,23,730 due to mistake, the assessee has taken it at Rs. 8,23,730. 9. According to the ITO, however, since the assessments for the assessment years 1989-90 and 1990-91 were made by invoking section 115J(1 of the Act, there was no question of bringing forward the unabsorbed depreciation/losses amounting to Rs. 29,28,146. Regarding investment allowance relating to the assessment year 1990-91, he held that only Rs. 72,560 remained to be absorbed (Rs. 22,71,599 (-) income of Rs. 21,99,039 computed under the normal provisions of the Act). He set off the same against the income for the year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whether the total income as computed under the various provisions of the Act is below 30 per cent of the book profits of the company. Once this exercise is done, all those provisions should be given the go-by, if it is found that the total income is below 30 per cent of the book profit. Admittedly, the total income computed under the provisions of the Income-tax Act for the assessment years 1989-90 and 1990-91 was less than 30 per cent of the assessee's book profits and, therefore, the assessee was charged to tax on 30 per cent of its book profits, by applying section 115J. The application of section 115J for these years automatically excluded the other provisions of the Act, including those relating to the carry forward and set off of the past losses and allowances and, therefore, there was no question of those losses and allowances getting revived in the year under appeal. The difficulty in accepting the argument of the ld. Departmental Representative is created by sub-section (2) of section 115J. This sub-section states that nothing contained in sub-section (1) shall affect the determination of the amounts in relation to the year in which the provisions of section 115J are appl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss words in section 115J authorising the taking away of the right. It was argued on behalf of the department that express words for this purpose are not necessary and once sub-section (1) of section 115J provided for the deeming of the total income of the assessee-company to be an amount equal to 30 per cent of the book profits, by implication it followed that the vested right had been taken away, since what would have been normally available to the assessee for set off against the income was not being given. We are certain that such a result or consequence should not be permitted to follow as a matter of course or by implication. It has to be remembered that what sub-section (1) of section 115J provided for was only a deeming limited to the ascertainment of the total income of the assessee on which it should pay tax. There is no second deeming in the sub-section itself to the effect that once the total income is so determined, the assessee should forget about all the past losses and allowances and that it would be deemed that all such losses and allowances had been taken care of. We have already noticed this argument of Mr. Bajoria. In support of this argument, he cited the follow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... To hold so would be to treat the assessee's vested right in a cavalier fashion not authorised by the Legislature. 11. Turning now to the contention of the revenue that since sub-section (1) of section 115J opens with a non obstante clause, the other provisions of the Act are automatically ruled out or excluded, we are afraid that the same cannot be accepted if due regard is had to the true effect of the non obstante clause. Recently the Supreme Court had occasion to consider the scope and purport of the non obstante clause in the case of Bharat Hari Singhania v. CWT [1994] 207 ITR 1. At page 24 of the report, the Supreme Court held that the scope and purport of a non obstante clause have to be ascertained by reading it in the context of the provisions and consistent with the scheme of the enactment. As already noticed, the provisions of section 115J had a specific purpose, namely, that of collecting tax from affluent companies which were not paying income-tax in view of the various benefits and deductions available to them under the various provisions of the Act. A summary scheme of assessment had to be devised, authorising the Income-tax Officer to collect tax from such compani ..... X X X X Extracts X X X X X X X X Extracts X X X X
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