@JUDGMENTTAG-ORDER
In the Calcutta High Court Y.R. Meena & Arun Kumar Mitra, JJ.
Order
By The Court
On an application u/s 256(1) of the Income Tax Act, 1961, Tribunal has referred the following question for the opinion of this court :
Whether, on the facts and in the circumstances of the case and on a proper interpretation of section 115J(2) of the Act, the Tribunal was right in
law in holding that the unabsorbed losses/allowances to the extent of Rs. 15,78,210 relating to the assessment years 1983-84, 1986-87, 1987-88
and 1990-91 were eligible to be set off against the income for the assessment years 1991-92 ?
2. The assessment for the assessment year 1989-90 was made by invoking the provision of section 115J and the assessee''s total income in
accordance with that section was determined at Rs. 9,74,816, for the assessment year 1990-91 the income was also similarly determined at Rs.
6,73,920 under the same provision. The provision of section 115J were omitted with effect from 1-4-1991, i.e., from the assessment year 1991-
92 i.e., the relevant assessment year in the case in hand.
In the year under appeal while computing the assessment u/s 143(3) 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 assessment year 1991-92.
The Income Tax Officer set off only Rs. 72,560 which represents unabsorbed investment allowance against the income of the assessee for
assessment year 1991-92. According to him, in the assessment years 1989-90 and 1990-91 the entire unabsorbed business loss/depreciation and
investment allowance had been adjusted, save and except the investment allowance of Rs. 72,560 which alone can be set off against the income of
assessment year 1991-92. He, therefore, rejected the assessee''s claim for set off of the unabsorbed loss and allowance amounting to Rs.
15,78,210.
In appeal before the Commissioner (Appeals), Commissioner (Appeals) confirmed the view taken by the assessing officer, though on different
ground. In appeal before the Tribunal, the Tribunal has allowed the claim of the assessee. According to the Tribunal, sub-section (2) clarified that
consequence of applying the deemed provision of sub-section (1) would not be that the assessee- company would also lose its right to have the
aforesaid allowance and loss for that year determined and carried forward to the subsequent year. Tribunal also pointed out that there was an
arithmetical mistake committed by the assessing officer, holding that the loss were set off in the earlier years.
3. None appeared for the assessee. We heard learned counsel for the revenue. Learned counsel for the revenue Mr. Dutt submits that once there
is a non obstante clause in sub-section (1) of section 115J the income shall be determined as per sub-section (1) of section 115J.
4. Sub-section (1) of section 115J provides a fiction for taking the deemed income. That provides that though as per the provision of the Act in
computing the income, income may come at nil. But in such cases, in case of companies referred in sub-section (1) while computing the income of
the previous year, after 1-4-1988, and before the 1-4-1991, if the income computed as per the provision of the Act is less than 30 per cent of the
book profits in such cases the 30 per cent of the book profit shall be taken as deemed income for the purpose of Income Tax.
Sub-section (2) further provides nothing contained in sub-section (1) shall affect the determination of amount in relation to the relevant previous
year to be carried forward to the subsequent year or years under the provisions of sub-section (2) of section 32 or sub-section (3) of section 32A
or clause 2(ii) of sub-section (1) of section 72 or section 73 or section 74 or sub-section (3) of section 74A, or sub-section (3) of section 801J.
The income shall be computed in respect of the deemed income and the deductions provided under the sections referred in sub-section (2) are to
be taken into account for the purpose of ascertaining the loss, if any, and that has to be allowed to carry forward to be set off in the subsequent
year or years. That clearly shows that the legislature has intended though even the income may not be taxable under the provision of the Act but if
the income is less than 30 per cent of the book profit if computed in accordance with the provisions of the Act, 30 per cent of the book profit be
taken as a deemed income. But for that assessee should not suffer and that has been taken care of by allowing the loss which assessee suffered on
account of not allowing the deductions for which the assessee is entitled under the Act. That has to be ascertained on allowing all these deductions
and whatever the net loss comes on taxing the 30 per cent of book profit that has to be allowed to carry forward and be allowed to set off against
the income of subsequent year or years.
5. In our considered opinion, there is no substance in the argument of Mr. Dutt that provision of sub-section (2) are contrary and does not prevail
over sub-section (1) of section 115J. Under the scheme of section 115J it left no doubt or ambiguity under scheme behind section 115J whatever
the loss assessee suffered on account of fixation of the deemed income, the assessee is permitted to carry forward that loss and that loss can be set
off against the income of subsequent year or years.
In view of the aforesaid provisions, we find no infirmity in the order of the Tribunal.
In the result, we answer the question in affirmative i.e., in favour of the assessee and against the revenue.
The reference so made stands disposed of accordingly.
