Delhi High Court
Deputy Cit vs Triveni Engineering Works Ltd.. on 31 July, 2002
Equivalent citations: (2004)88TTJ(DEL)165
ORDER
S.K. Yadav, J.M. This appeal is preferred on behalf of the revenue against the order of the Commissioner (Appeals) pertaining to the assessment year 1991-92 on a solitary ground that he has erred in interpreting the provisions of section 115J, sub-section (2) of the Income Tax Act and directing the assessing officer to allow the carry forward of losses to be set off in subsequent years as claimed by the assessed- company.
2. The facts in nutshell borne out from the record are that during the course of assessment proceedings, the assessed has claimed that an amount of Rs. 46,58,692, Rs. 1,04,19,537 and Rs. 97,82,170 for assessment years 1988-89, 1989-90 and 1990-91 respectively be allowed to be carried forward. These are the amounts which were determined as income under section 115J for the respective years. The claim of the assessed before the assessing officer was that the benefit of that amount which was paid under section 115J in earlier years should be allowed in carry forward of loss/depreciation etc. The contention of the assessed did not find favor with the assessing officer. While disallowing the claim of the assessed, the assessing officer made following observations :
"What the assessed is, therefore, asking is that what amount the assessed has paid under section 115J in earlier years, the benefit of that should be allowed in carry forward of loss/depreciation etc. The contention of the assessed is not acceptable. Section 115J stipulates special provision relating to certain companies by which the total income of a company is deemed to be equal to 30 per cent of its book profit. This is the deeming provision and in no way affect the computation of total income of assessed under this Act. Section 115J starts with non obstante clause and it does not affect the computation of total income under the Act but only provides chargeability of tax on due total income. It does not amount to say that the, total income to the assessed in the Act is computed on such figures at 30 per cent of book profit. The determination of the amount in relation to the previous year to be carried forward in subsequent years under the provisions of the Act are not effected by this due income. It is otherwise to be deemed specially stipulated in sub-section (2) of section 115J. Therefore, the assessed cannot be allowed benefit of carry forward of amount of what he has paid is as per provisions of section 115J."
3. Against the disallowance, the assessed carried the matter before the Commissioner (Appeals) with the submission that provisions of section 115J(2) of the Income Tax Act provides that the unabsorbed allowance are to be treated as actually set off only up to the figure which will result in total income being equal to section 115J income. In support of his contention, the assessed has relied upon the Tribunal's order in the case of Motor General Finance in ITA No. 7378/D/1992 in which investment allowance had been claimed for set off. Following the order of the Tribunal, the Commissioner (Appeals) directed the assessing officer to allow carry forward of loss as claimed by the assessed.
4. Aggrieved, the revenue has preferred an appeal before us with the submission that the ratio laid down in the case of Motor General Finance Company is not at all applicable to the assessed's case because while dealing with the impugned issue, the Tribunal has not considered the Circular No. 495 dated 22-9-1987, reported at (1987) 168 ITR 87 (St) through which the Board has clarified how to carry forward unabsorbed depreciation/losses, unabsorbed investment allowance in succeeding years. The learned Departmental Representative, Mrs. Anita Kapoor has emphatically argued that the Commissioner (Appeals) has allowed the claim of the assessed- company of carrying forward of loss/depreciation purportedly available from 1988-89, 1989-90 and 1990-91. Having accepted the contention of the assessed the Commissioner (Appeals) held that since tax for these years was charged by invoking the provisions of section 115J(1) and deeming 30 per cent of book profit to be the total income, therefore, the losses were to be treated as annual set off only up to the figure which would result in total income being equal to deemed income charged to tax in terms of section 115J(1) of the Income Tax Act (hereinafter referred to as the Act) whereas the determination of carry forward of unabsorbed depreciation/losses and other allowances would be governed by the normal provisions of the computation of income under the Act in view of specific provisions of section 115J(2) of the Act.
5. Having invited our attention to the provisions of section 115J of the Act, the learned Departmental Representative has submitted that language of 115J is very clear and it mandates in unequivocal terms that nothing contained in subs. (1) of section 115J would affect the determination of accounts to be carried forward to subsequent years. Thus, it is unambiguously provided that deeming provisions of section 115J(1) is confined to computation of income available to tax for the relevant previous year and cannot be imparted to influence working of amounts to be carried forward to subsequent years. Mrs. Kapoor further submitted that section 115J involves two processes : Firstly, the assessing authority determines the income under the provisions of the Income Tax Act and if it is less than 30 per cent of the book profit, the latter is deemed to be income chargeable to tax in terms of fiction created by section 115J(2) of the Act. Sub-section (2) of section 115J is the saving clause and it permits, determination of amounts to be carried forward uninfluenced by provisions of sub-section (1). In absence of sub-section (2) that a specific direction to ignore provisions of sub-section (1) a deeming fiction under sub-section (1) would have put an end to any claim of carry forward of losses etc.
6. Learned Departmental Representative further submitted that the view point canvassed by the assessed and sustained by the Commissioner (Appeals) tantamounts to treating the tax paid for deemed income as a kind of advance tax for which benefit may be obtained in subsequent year by increase of brought forward losses and allowances corresponding to the figure of deemed income quantified under section 115J(1). Such a benefit has not been conferred under section 115J of the Act. This interpretation would make the words "nothing contained in sub-section (1) shall affect the determination of amounts in relation to the previous year" otiose.
7. With regard to the order of the Tribunal rendered in the case of Motor General Finance Co. (supra) learned Departmental Representative canvassed that the Tribunal has amplified the scope of provisions of section 115J by interpolating the formula for allowing an amount equal to the deemed taxable income to be carried forward in order to ensure that interpretation is harmonized in the spirit of the provisions. The interpolation is not justified in clear language of the provisions of section 115J of the Act. The learned Departmental Representative further submits that the violation of the clear language of the statute is not permitted even if it makes the provisions appear more equitable. The language of the statute cannot be tampered with and the taxing statute has to be strictly construed and nothing can be read into it. In a taxing Act, one has to look merely at what is clearly said; there is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax : Nothing is to be read in, nothing is to be implied. One can look fairly at the language used. In support of this contention, learned Departmental Representative has relied upon the following judgments :
(i) Federation of Andhra Pradesh Chambers of Commerce & Industry & Ors. v. State of Andhra Pradesh & Ors. (2001) 165 CTR (SC) 672
(ii) CED v. Kantflal Trikamlal 1976 (4) SC 643
(iii) Commr. of Agrl. IT v. Plantation Corpn. of Kerala Ltd. (2001) 247 ITR 155 (SC)
8. Learned Departmental Representative further submits that section 115J was introduced by the Finance Act, 1987, to tax the companies to levy minimum tax on zero-tax companies. In this regard, she has referred the budget speech of the then Finance Minister reported at (1987) 165 ITR 14 (SC) (St) and CBDT Circular No. 495 dated 22-9-1987, With regard to the judgment of Gauhati High Court in the case of Lallacherra Tea Co. (P) Ltd. v. CIT (1999) 239 ITR 611 (Gau) and of Calcutta High Court in the case of CIT v. Singh Alloys & Steel Ltd. (2002) 253 ITR 650 (Cal). Learned Departmental Representative has submitted that in these judgments Circular No. 495 (supra) of CBDT and the provisions of section 115JAA were neither cited nor considered by the Hon'ble Courts. Moreover, both the Courts were not apprised of the view already taken by the Andhra Pradesh High Court in its judgment in the case of Suryalatha Spinning Mills Ltd. v. Union of India (1997) 223 ITR 713 (AP) in which provision of section 115J were analysed by the Hon'ble court exhaustively after having considered the Circular No. 495 of CBDT.
9. Learned Departmental Representative further placed reliance upon the order of the Ahmedabad Bench in the case of Gujarat Petrosynthese Ltd. v. Dy. CIT (2001) 71 TTJ (Ahd) 349 : (2001) 76 ITD 257 (Ahd) in which the Tribunal has adopted the view taken by the Hon'ble Andhra Pradesh High Court in the case of Suryalatha Spinning Mills Ltd. (supra) and finally held that such amount of unabsorbed depreciation and investment allowance should be carried forward to subsequent year/years as could have been determined under regular provisions of Act and upheld the order of the assessing officer. The learned Departmental Representative has also placed reliance on the judgment of the apex court in the case of Nova Pan India Ltd. v. Collector of Central Excise & Customs (1994) (73) ELT 769 (SC) in which their Lordships have laid down the principle that in the taxing statute, there is no room for any intendment, that regard must be had to be clear meaning of the word and that the matter should be governed wholly by the language.
10. Learned counsel for the assessed, on the other hand, besides supporting the Commissioner (Appeals)'s order has heavily relied upon the order of the Tribunal in the case of Motor General Finance (supra) with the submission that the impugned issue was thoroughly examined by the Tribunal in the light of various judicial pronouncements and the relevant legal provisions and it was finally held that the investment allowance as claimed by the assessed to the extent of 30 per cent of the book profit on which it is required to pay tax and remaining amount of unabsorbed investment allowance will be carried forward to be set off from the income of the assessed to the subsequent years along with unabsorbed investment allowance allowable to the assessed in the assessment year. Since the impugned issue is squarely covered by the aforesaid order of the Tribunal, there would be no reason to res judicata the issue again in a similar set of facts. The learned counsel for the assessed further submits that if there is a difference of opinion on a particular issue, the view favorable to the assessed should be adopted in the light of judgment of the apex court in the case of CIT v. Vegetable Products (1973) 88 ITR 192 (SC).
11. On consideration of rival submissions and from a careful perusal of record, we find that the assessing officer has disallowed the claim of Rs. 46,58,692, Rs. 1,04,98,537 and Rs. 97,82,170, an income determined under section 115J for the assessment years 1988-89, 1989-90 and 1990-91 respectively of the assessed for its carried forward to succeeding years on the ground that section 115J stipulates special provisions relating to certain companies of which total income is deemed to be equal to 30 per cent of its book profit and this deeming provision in no way affects the determination of amount in relation to the previous year to be carried forward in subsequent years under the provisions of the Act. The Commissioner (Appeals) has accepted the claim of the assessed having simply relied upon the Tribunal's order in the case of Motor General and Finance Co. (supra). A copy of the.order of the Tribunal in the case of MFG Ltd. is placed before us and from its perusal, we find that the Circular No. 495, dated 22-9-1987 of the CBDT through which CBDT has made its effort to clarify the scope of section 115J with regard to carry forward of unabsorbed losses and investment allowance etc. was neither referred nor considered by the Tribunal. Even the judgment of the Andhra Pradesh High Court in the case of Suryalatha Spinning Mills were not brought to the notice of the Tribunal. Recently, the Ahmedabad Bench of the Tribunal has taken a contrary view after having considered the CBDT Circular and judgment of the Andhra Pradesh High Court. While dealing with the issue the Ahmedabad Bench has also considered the judgment of other High Courts in which contrary view was taken.
12. Keeping in view the controversial findings of different Benches of the Tribunal in different High Courts, we feel it proper to re-examine the issue again in the light of aforesaid various judicial pronouncements. Before adverting to the impugned issue, we prefer to reproduce section 115J of the Act for ready reference :
"115J. (1) Notwithstanding anything contained in any other provision of this Act, where in the case of an assessed being a company (other than a company engaged in the business of generation or distribution of electricity), the total income, as computed under this Act in respect of any previous year relevant to the assessment year commencing on or after the 1-4-1988 (but before the 1-4-1991) (hereafter in this section referred to as the relevant previous year) is less than thirty per cent of its book profit, the total income of such assessed chargeable to tax for the relevant previous year shall be deemed to be an amount equal to thirty per cent of such book profit.
(1A) Every assessed, being a company, shall, for the purposes of this section, prepare its P&L a/c for the relevant previous year in accordance with the provisions of Parts II and III of Schedule VI to the Companies Act, 1956 (1 of 1956).
Explanation : For the purposes of this section "book profit" means the net profit as shown in the P&L a/c for the relevant previous year (prepared under sub-section (IA), as increased by
(a) the amount of income-tax paid or payable, and the provision therefore; or
(b) the amounts carried to any reserves (other than the reserves specified in section 80HHD (or sub-section (1) or section 33AC), by whatever name called; or
(c) the amount or amounts set aside to provisions made for meeting liabilities, other than ascertained liabilities; or
(d) the amount by way of provision for losses of subsidiary companies; or
(e) the amount or amounts of dividends paid or proposed; or
(f) the amount or amounts of expenditure relatable to any income to which any of the provisions of Chapter III (applies; or).
(g) the amount withdrawn from the reserve account under section 80HHD, where it has been utilized for any purpose other than those referred to in sub-section (4) of that section;
(h) the amount created to the reserve account under section 80HHD, to the extent that amount has not been utilized within the period specified in sub-section (4) of that section;
(ha) the amount deemed to be the profits under sub-section (3) of section 33AC;
(If any amount referred to in clauses (a) to (f) is debited or, as the case may be, the amount referred to in clauses (g) and (h) is not credited) to the P&L a/c, and as reduced by,
(i) the amount withdrawn from reserves (other than the reserves specified in section 80HHD) or provisions, if any such amount is credited to P&L a/c :
Provided that, where this section is applicable to an assessed in any previous year (including the relevant previous year), the amount withdrawn from reserves created or provisions made in a previous year relevant to the assessment year commencing on or after the 1-4-1988, shall not be reduced from the book profit unless the book profit of such year has been increased by those reserves or provisions (out of which the said amount was withdrawn) under this Explanation; or
(ii) the amount of income to which any of the provisions of Chapter III applies, if any such amount is credited to the P&L a/c; or
(iii) the amounts (as arrived at after increasing the net profit by the amounts referred to in clauses (a) to (f) and reducing the net profit by the amounts referred to in clauses (i) and (ii) are attributable to the business, the profits from which are eligible for deduction under section 80HHC or section 80HHD; so, however, that such amounts are computed in the manner specified in sub-section (3) or sub-section (3A) of section 80HHC or sub-section (3) of section 80HHD, as the case may be; or
(iv) the amount of the loss or the amount of depreciation which would be required to be set off against the profit of the relevant previous year as if the provisions of clause (b) of the first proviso to sub-section (1) of section 205 of the Companies Act, 1956 (1 of 1956), are applicable.
(2) Nothing contained in sub-section (1) shall affect the determination of the amounts 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 (ii) or 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 80J. "
13. From a plain reading of this section, we find that where in the case of the assessed being a company other than a company engaged in the business of generation or distribution of electricity, the total income as computed under the Income Tax Act in respect of any previous year is less than 30 per cent of its book profit as computed as per sub-section (1A), the total income of such assessed chargeable to tax for the relevant previous year shall be deemed to be an amount equal to 30 per cent of such book profit. This provision was inserted by the Finance Act, 1987, with effect from, 1-4-1988, to tax zero-tax companies which has shown sufficient book profit for the purpose of Companies Act and distributed its dividend but for the income-tax purposes, it declared the nil or Lesser income. Sub-section (2) of section 115J further states that sub-section (1) shall not affect the determination of depreciation of sub-section (2) under section 32, investment allowance under sub-section (3) of section 32A, business loss under sub-section (1) of section 72, losses in capital gains, etc. in relation to relevant previous year to be carried forward to the subsequent year or years. This sub-section (2) was examined by the Tribunal in the case of Motor General Finance (supra), and arrived at a conclusion that sub-sections (1) and (2) of section 115J had to be read together and the interpretation should be harmonized in the spirit of the provision. In sub-section (1), the mandate is to calculate the total income under the Income Tax Act which would include the set off of unabsorbed loss and depreciation under previous year but sub-section (2) expressly provides that nothing contained in sub-section (1) shall affect the determination of the amount in relation to the relevant previous year to be carried forward to subsequent year or years under the provisions of sub-section (2) or clause 2 of sub-section (1) of section 72 or 73 or 74 or sub-section (3) of 74A or sub-section (3) of section 80J.
14. The Tribunal has further observed that the proper way to harmonise sub-sections (1) and (2) is to read sub-section (1) as being restricted to the computation of total income under the Income Tax Act before setting off unabsorbed loss and depreciation of earlier year. If the loss is wholly set off from the income of the current year so as to bring the income at nil, the words determination of the amount to .to be carried forward in sub-section (2) could be rendered meaningless. In case the interpretation is adopted so as to see set off of the entire unabsorbed investment allowance in the year as correct, then there was no need for such a provision as has been incorporated under sub-section (2) because such provision is in-built in the scheme of the Income Tax Act and further, the aforesaid interpretation would render the unabsorbed investment allowance to become a dead loss. The Tribunal has finally opined that the investment allowance as claimed by the assessed to the extent of 30 per cent of the book profit on which it is required to pay tax and remaining amount of unabsorbed investment allowance will be carried forward to be set off from the income of the assessed in the subsequent year along with the unabsorbed investment allowance allowable to the assessed in the assessment year.
While deciding the appeal, the Tribunal has not dealt with the Circular No. 495 issued by the CBDT clarifying the working of deemed income and carry forward of loss/depreciation etc. though an illustrative example. The relevant portion in the Circular relating to levy of minimum tax on book profit is reported at (1987) 168 ITR 10 (St). Through this Circular, CBDT has clarified that section 115J involves two processes; firstly, the assessing authority has to determine the income of the company under the provisions of the Income Tax Act; secondly, book profit is to be worked out in accordance with the Explanation to section 115J(1A) and it is to be seen whether the income determined under the first process is less than 30 per cent of the book profit. If the income determined under the first process is less than 30 per cent of the book profit, the total income of the assessed shall be deemed to be an amount equal to 30 per cent of such book profit. Sub-section (2) of section 115J, however, provides that application of this provision, i.e., sub-section (1) would not affect the determination of carry forward of unabsorbed depreciation, unabsorbed investment allowance, business loss etc. as computed under the Income Tax Act. In this Circular, the CBDT has also given certain examples to clarify the determination of carry forward of unabsorbed depreciation or unabsorbed investment allowance etc. On perusal of the Tribunal's order in the case of Motor General Finance (supra), we find that the circular was never cited before the Tribunal during the course of argument. We have also come across judgment of the Andhra Pradesh High Court in the case of Suryalatha Spinning Mills & Anr. (supra) under section 115J reported at 223 ITR 713 in which their Lordships have examined the scope of both the sub-sections of section 115J of the Act. While dealing with the issue, their Lordships have observed as under :
"The object of insertion of section 115J of the Income Tax Act, 1961, was to ensure levy of minimum tax on what are known as "prosperous zero-tax companies" under the scheme of the section, which is a self-contained provision, where the total income of companies as computed under the provisions of the Income Tax Act, in respect of the previous year relevant to the assessment year after 1-4-1988, is less than 30 per cent of their book profits, the total income of such companies chargeable to income-tax for the relevant previous year is treated as income equal to 30 per cent of such book profits and is taxed accordingly.
It also provides for certain adjustments by way of adding amounts and granting deductions for computing the chargeable income under section 115J(1). Sub-section (2) provides that determination of the amounts in relation to the relevant previous year to be carried forward to the subsequent year or years will have to be made unaffected by the provisions in sub-section (1) of section 115J. This provision involves two processes : First the assessing authority has to determine the income of the company under the provisions of the Income Tax Act, and secondly, the book profit has to be worked out in accordance with the Explanation below section 115J(1A), then it will have to be seen whether the total income determined under the first process is less than 30 per cent of the book profit: if so, sub-section (1) would be invoked and the total income of such a company chargeable to income-tax for the relevant previous year shall be equal to 30 per cent of such book profit.
Sub-section (2) of section 115J cannot be interpreted to permit the assessed- company, where its notional income has been taxed under section 115J(1) to carry forward unabsorbed loss or unadjusted allowance of an amount equal to the taxed income because :
(a) for the purpose of arriving at the total taxable income under the provisions of Income Tax Act, carried forward losses are already adjusted;
(b) since sub-section (2) of section 115J of the Act is a saving provision and does not confer any further right, the amount of income arrived at the for the purpose of exigibility of income-tax under sub-section (1) of section 115J cannot be taken note of, while considering the question of varying forward of unadjusted loss;
(c) the very object of the provision of section 115J is to tax such companies which are making huge profits and also declaring substantial dividends, but are managing their affairs in such a way as to avoid payment of income-tax, as a result of various tax concessions and incentives and for that purpose, the taxable income is determined under sub-section (1) of section 115J and if any loss equal to the income thus determined is allowed to be adjusted, that would frustrate and nullify the very object of enacting the provision.
From a plain reading of sub-section (2) of section 115J, it is clear that the quantum of unabsorbed losses, unadjusted depreciation, etc. for the purpose of carrying forward has to be under the provisions of the Act, irrespective of the quantum of income determined under the provisions of sub-section (1) of section 115J. There would be no scope for the revenue to contend that in view of the provision of sub-section (1), the unabsorbed depreciation allowance, unadjusted loss or deficiency, etc. as the case may be, can no longer by carried forward to the subsequent year or years. On the determination of the taxable income, under the relevant provisions of the Act, whatever amounts remain to be carried forwarded under the regular computation, either by say of unabsorbed losses or unadjusted allowances have to be carried forward to the next year ignoring the fact that a notional income is made taxable under sub-section (1) of section 115J."
15. Their Lordships have also observed on the point of double taxation which was raised by the assessed during the course of hearing that section 115J does not result in double taxation. What is being taxed is income determined on the basis of income prescribed under the said provisions and there is no provision to retax the same income. The right to carry forward losses and unadjusted allowances as kept intact by sub-section (2) of section 115J merely because a sum equal to the income determined as taxable under sub-section (1) is not treated as unabsorbed loss, etc. which under no provision of the Act can be so treated. It cannot be said that there is double taxation. Even if there is double taxation, that would not per se render the provisions invalid. We have also examined the object of the introduction of this new provision from the budget speech of the then Finance Minister reported at (1987) 165 ITR 14 (St) wherefrom it is clear that this provision was inserted to bring the zero-tax companies within the income-tax net. Under this new provision, the zero-tax company has to pay at least 30 per cent of its book profit computed as per Companies Act and in terms of Explanation to sub-section (1A).
16. We have also examined the order of the Tribunal in the case of Gujarat Petrosynthese Ltd. v. Dy. CIT (supra) which was also referred before us during the course of hearing and from its perusal, we find that similar issue was examined by the Ahmedabad Bench. Relevant observation of the Tribunal are as under :
"Section 115J has been introduced by way of an independent Chapter XII-B in the Income Tax Act by the Finance Act, 1987, and it came into force from the assessment year 198889. While introducing section 115J, the legislature deleted section 80VVA which provided for levy of minimum tax on companies. The object of insertion of section 115J was to ensure levy of minimum tax on what are known as prosperous zero-tax companies. Such companies were showing huge profits in the P&L a/c and they are also declaring dividend to the shareholders but on account of various incentives and increase in depreciation rates, among other, were showing very little or nil total income. Under the scheme of above section, which is a self contained provision in case of certain companies whose total income, as computed under the provisions of the Act, is less than 30 per cent of their book profits, the total income of such companies chargeable to income-tax for the relevant previous year is treated as an amount equal 30 per cent of such book profits and is taxed accordingly.
An Explanation appended to section 115J(1) provides for certain adjustments by way of adding amounts and granting deductions for computing the book profit for the purposes of section 115J(1), the sub-section starts with a non obstante clause reading as 'notwithstanding anything contained in any other provisions of this Act'. The sub-section thus creates a deeming provision where under 30 per cent of the book profit is deemed to be total income chargeable to tax. The non obstante clause ensures that the provisions of the Act will not an impediment for the operation of the legal fiction created by sub-section (1).
A plain reading of the sub-section (2) of section 115J would indicate that the legal fiction created by enacting sub-section (1) has a limited scope and would not affect determination of the amounts in relation to the relevant previous year . to be carried forward under the provisions of sub-section (2) of section 32 or sub-section (3) of section 32A. Sub-section (2) thus lays down in unambiguous and clear terms that the determination of the carry forward of unabsorbed depreciation, unabsorbed investment or losses, etc. under the regular provisions of the Act would not be affected by the deeming fiction contained in sub-section (1) which provides that 30 per cent of the book profit would be treated as total income chargeable to tax.
The expression 'determination of the amounts in relation to previous year to be carried forward to the subsequent year or years under the provisions of sub-section (2) of section 32, used in section 115J(2) clearly envisages the determination of carried forward unabsorbed depreciation worked out by the assessing officer in relation to assessment years under consideration and carrying forward of the said amounts to the subsequent year or years uninfluenced and unaffected by the operation of deeming fiction of sub-section (1).
When the words of a statute are clear, plain or unambiguous, i.e., they are reasonably susceptible to only one meaning, the Courts are bought to give effect to that meaning irrespective of consequences.
Since the deeming fiction created under sub-section (1) does not extend to determination of the carried forward unabsorbed depreciation, losses, etc. as explicity and unequivocally provided under sub-section (2), there is no ambiguity in the provisions.
The argument that the interpretation adopted by the assessing officer in carrying forward the unabsorbed deprecation, etc. as determined under the regular provisions, without considering the fact that the assessed has been subjected to tax on notional income leads to inequitable results, could not be accepted. It does not lie within the province of this Tribunal to modify or amend the explicit enactments in the statute merely on the ground of inequitable results. It would be relevant to mention that the special provisions relating to zero-tax companies, as enacted under section 115J were in operation for three assessment years, viz., assessment years 1988-89 to 1990-91 and with effect from, 1-4-1997 new provisions were enacted by inserting section 115JA by the Finance (No. 2) Act, 1996 with effect from 1-4-1997. The scheme for levy of minimum tax on zero-tax companies, as enacted in section 115JA, contains some modifications over the earlier scheme ehacted in section 115J. However, the broad parameters of the new scheme, viz., treating 30 per cent of the book profit as deemed total income for levy of tax remain the same. Thus, sub-section (1) of section 115JA is in pari materia with the provisions contained in sub-section (1) of section 115JA. Similarly, sub-section (3) of section 115J is a reproduction of sub-section (2) of section 115JA in the earlier scheme. However, a new provision section 115JAA has been inserted in the new scheme which provides tax credit in respect of tax paid on deemed income while computing tax for the subsequent assessment years. It appears that under the new scheme introduced by the Finance Act, 1997, the concept of tax credit has been brought in on grounds of equity by the legislature. Since section 115JA(3) in the new scheme is virtually the reproduction of sub-section (2) of section 115J of the earlier scheme, the content and meaning of both the sub-sections would be obviously the same. Now if the interpretation sought to be placed by the assessed on section 115J(2) is applied to section 115JA(3) in the new scheme, this would lead to unintended results involving double benefit inasmuch as the assessed would get the adjustment of deemed income against the brought forward depreciation and losses, etc. and also get the benefit of tax credit in the subsequent years. Thus, the total tax paid by the assessed over the years would be much less than the tax payable under the normal provisions of the Act. This would not only be contrary to the express statutory provisions, enacted under Chapter XII-B but also frustrate the objective, purpose and intention of the legislature to levy minimum tax on prosperous zero-tax companies. Therefore, the interpretation canvassed by the assessed would not only do violence to the express language of the enactment but would also bring manifestly absurd results.
Therefore, only such amounts of unabsorbed depreciation, investment allowances, etc. can be carried forward to the subsequent year or years as would have been determined under the regular provisions of the Act. Therefore, view taken by the assessing officer was to be upheld."
17. In the case of Kwality Biscuit Ltd. v. CIT (2000) 243 ITR 519 (Kar) their Lordships of the Karnataka High Court have observed after following the judgment of Surana Steel (P) Ltd. v. Dy. CIT (1999) 237 ITR 777 (SC) that the amounts to be carried forward like unabsorbed depreciation allowance and business loss from assessment year to which the provisions of section 115J are applied, should be those which were available to the assessed as at the commencement of the previous year relevant to the said assessment year, unaltered by making an assessment under section 115J, for that assessment year and carried forward amounts like unabsorbed depreciation, investment allowance and business loss should be reckoned as if a regular assessment is made under section 143(3)/144 of the Act for the year in question and only such thing as emerge after making such a notional assessment for that year, could be carried forward and written down value as at the commencement of the relevant previous year in respect of the assets then in existence for the current assessment year should remain the same for the immediately succeeding assessment year unaltered by a notional assessment, that might be made for the purpose of examining the applicability of section 115J and the amount of depreciation which is absorbed in notional assessment under section 143(3) or 144 for the relevant assessment year reducing the income to nil should be deemed to have been actually allowed for the purpose of working out the written down value for the immediately subsequent assessment year.
18. Similar view was again expressed by the Hon'ble Calcutta High Court in the case of CIT v. Singh Alloys & Steel Ltd. (2002) 253 ITR 650 (Cal) in which their Lordships have held that section 115J of the Income Tax Act, 1961, enacts a fiction. In the case of companies referred to in sub-section (1) while computing the income of the previous year, after the 1-4-1988, and before the 1-4-1991. If the income computed as per the provisions of the income-tax is less than 30 per cent of the book profit, 30 per cent of book profit shall be taken as deemed income for the purpose of Income tax Act. Sub-section (2) further provides that nothing contained in sub-section (1) should affect the determination of the 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 II of sub-section (1) of section 72 or section 73 or section 74 or sub-section (3) of section 74A or sub-section (30) of section 80J. 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, that has to be allowed to be carried forward to be set off in the subsequent year or years. That clearly shows that the legislature has intended that though the income may not be taxable under the provisions of the Act 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 should be taken as deemed income. But for that the assessed should not suffer and that has been taken care of by allowing the loss which the assessed has suffered on account of not being allowed the deduction which the assessed is entitled to under the Act. That has to be ascertained on allowing all these deductions and whatever the net loss, that has to be allowed to be carried forward and set off against the income of the subsequent, year or years.
19. We have also examined the various judgments referred to by the assessed on the point of interpretation of fiscal laws and we are of the considered opinion that whenever no ambiguity is noticed, in the language of a particular section, it should be strictly interpreted as held by the apex court in the case or CIT v. Plantation Corpn. of Kerala Ltd. (supra) in which their Lordships have categorically held that so long as there is no ambiguity in the statutory language, resort to any interpretative process to unfold the legislature intent becomes impermissible. Section 115J was introduced by the Finance Act with effect from, 1-4-1988, to charge income-tax on zero-tax companies, the companies which declares the nil income or in loss though earn sufficient income and declare substantial dividends after computing profit under the Companies Act, at the rate of 30 per cent of their book profit computed as per sub-section (1A) and Explanation mentioned below thereof if the total income of these companies computed under the Income Tax Act is less than 30 per cent of their book profit. Sub-section (1) deals with the chargeability of income-tax on zero-tax companies. It does not talk about the carry forward of unabsorbed losses, depreciation, and investment allowances, etc. With intent to give a relief, sub-section (2) was also inserted in section 115J which deals with the determination of unabsorbed depreciation, business loss, investment allowance, etc. for its carry forward to subsequent year or years. It has been specifically mentioned in the sub-section that sub-section (1) shall have no effect on the determination of the aforesaid unabsorbed depreciation, investment allowance, business loss, etc. It means that both these sub-sections are totally independent. The income determined under sub-section (1) shall have no bearing over the determination of the aforesaid unabsorbed depreciation, unabsorbed losses and investment allowance, etc. for its carry forward.
20. As expressed by the various High Courts and the other Benches of the Tribunal that unabsorbed depreciation investment allowance, business loss, etc. shall be determined as per the provisions of the Income Tax Act in a regular manner irrespective of the fact that the total income was determined at 30 per cent of the book profit as per sub-section (1) of section 115J of the Act, the aforesaid determination should be done in the manner as it would have been done in the case where the regular assessment for that assessment year is made either under section 143(3) or 144(4) of the Act. Since much water has flown after the order of the Tribunal in the case of Motor General Finance (supra) which was rendered by the Tribunal in the year 1993, we have to examine the impugned issue in the light of various judicial pronouncements and CBDT Circular which was not at all considered by the Tribunal while rendering the judgment.
21. Keeping in view the totality of the facts and circumstances of the case and also in the light of various judicial pronouncements as discussed above, we are of the considered opinion that unabsorbed depreciation, business loss, in the instant case, shall be determined as per the provisions of the Income Tax Act in a regular manner as has been done in the assessments framed under section 143(3) or 144 without taking into account a fact that total income of the assessed was computed in that assessment year at 30 per cent of the book profit as per section 115J(1) of the Act. We, therefore, do not find ourselves in agreement with the proposition laid down by the Commissioner (Appeals). Accordingly, we set aside the order of the Commissioner (Appeals) and restore the matter to the file of the assessing officer to recompute the claim of unabsorbed losses in terms indicated above.
22. In the result, the appeal of the revenue is allowed for statistical purposes.