Income Tax Appellate Tribunal - Mumbai
Hindustan Conductors Limited vs Dcit, Special Range-1 on 31 January, 2003
Equivalent citations: [2005]272ITR137(MUM)
ORDER
M.K. Chaturvedi, VP
1. This appeal came before me as a Third Member to express my opinion on the following question:
"Whether, on facts and circumstances of the case, deduction on account of depreciation and investment allowances should be allowed for the year under consideration only to the extent it was necessary to reduce the income to the level of the income computed under Section 115J and consequently whether the order of the Assessing Officer and the Id. CIT(A) on interpretation of the provision of Section 115J(2) of the Income-tax Act, 1961 should be set aside."
2. I have heard the rival submissions in the light of material placed before me and precedents relied upon. The only dispute raised before me relates to the adjustment of the balance figure of investment allowance, i.e. the difference between investment allowance allowed in normal course and as allowed under Section 115J of the IT. Act, 1961. It was contended on behalf of the assessee before the revenue authorities that the balance figure of investment allowance should be allowed to be carried forward to the subsequent years.
3. In view of the decision of the Gauhati High Court rendered in the case of Lalla Cherra Tea Co. (PI) Ltd.(239 ITR 611)(Gauh), learned JM decided the issue in favour of the assessee.
4. Learned AM did not agree with the learned JM. He relied on the decision of the Hon'ble Andhra Pradesh High Court rendered in the case of Suryalatha Spinning Mills Ltd. v. Union of India (223 ITR 713)(AP) and the decision of the Karnataka High Court in the case of Widia (India) Ltd. v. CIT (242 ITR 678)(Kar).
5. It is pertinent to note that now the issue involved in the present appeal stands covered by the decision of the apex court rendered in the case of Karnataka Small Scale Industries Development Corporation Ltd. v. CIT (258 ITR 770)(SC). In this case, Hon'ble Supreme Court overruled the decision of the Gauhati High Court rendered in the case of Lalla Cherra Tea Co. (P.) Ltd. (supra) and approved the decision of Andhra Pradesh High Court in the case of Suryalatha Spg. Mills Ltd.(supra).
6. It was held by the Hon'ble Supreme Court that the scheme under Section 115J for levying tax by considering 30% 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 30% of its book profit, then the deemed total income of the assessee chargeable to tax for the previous year would be equal to 30% 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 30% of its book profits entitling it to pay tax only on 30% of its book profits. In deeming the total income to be 30% of the profits, the deductions claimed are not ignored. These are necessary ingredients in the formula for applying the fictional income.
7. Having regard to the fact that the view taken by the learned AM is in conformity with the law laid down by the apex court, I, respectfully following the decision of Hon'ble Supreme Court, agree with the view of the learned AM.
8. The matter will now go before the regular Bench for deciding the appeal in accordance with the opinion of the majority.