COMMISSIONER OF INCOME TAX Vs. M/S PRAKASH TUBES LIMITED
September, 02nd 2013
ITA No. 52/2000 Page 1 of 5 $~Part II-B (R-23) * IN THE HIGH COURT OF DELHI AT NEW DELHI + INCOME TAX APPEAL NO. 52/2000 Date of decision: 21st August, 2013 COMMISSIONER OF INCOME TAX ..... Appellant Through Mr. Abhishek Maratha, Sr. Standing Counsel.
Versus M/S PRAKASH TUBES LIMITED ..... Respondent Through Mr. Prakash Kumar, Advocate. CORAM: HON'BLE MR. JUSTICE SANJIV KHANNA HON'BLE MR. JUSTICE SANJEEV SACHDEVA SANJIV KHANNA, J. (ORAL): This appeal by the Revenue under Section 260A of the Income Tax Act, 1961(Act, for short) relates to Assessment Year 1989-90. The following substantial question of law was admitted for hearing vide order dated 30th November, 2000:-
“Whether the Tribunal has correctly interpreted the provisions of Section 115-J so far as mode ITA No. 52/2000 Page 2 of 5 of computation of income is concerned?”
2. The respondent-assessee is a limited company and for the year under consideration it has filed its return declaring income of Rs.91,25,683/- under Section 115-J of the Act. The assessee, however, had claimed that it was entitled to carry forward its loses including investment allowance of Rs.2,19,04,511/- as its taxable income was being assessed on the basis of book profits under Section 115-J and not under the normal provisions.
3. The Assessing Officer did not agree, observing that the computation of income under Section 115-J of the Act does not effect the determination of the amount to be carried forward to the subsequent year under the normal provisions. The Assessing Officer also made other additions while assessing the taxable income under the normal provisions.
4. Commissioner of Income Tax (Appeals) agreed with the Assessing Officer on the question of carry forward of loses, including investment allowance. He, however, allowed some relief to the respondent-assessee on additions made under the normal provisions. 5. Aggrieved, the respondent-assessee preferred an appeal before the tribunal. No appeal was preferred by the appellant-Revenue against the order passed by the CIT(Appeals).
6. Income Tax Appellate Tribunal by the impugned order dated ITA No. 52/2000 Page 3 of 5 16th August, 1999 followed its earlier order for the preceding year 1988-89, which in effect means that the appeal filed by the respondentassessee was allowed. In other words, the stand of the respondentassessee that they were entitled to carry forward of unabsorbed losses, including investment allowance was accepted in view of the fact that income taxable had been computed on book profits under Section 115- J and not under the normal provisions.
7. The aforesaid view of the tribunal is not in consonance with the authoritative pronouncement of the Supreme Court in Karnataka Small Scale Industries Development Corporation Limited versus Commissioner of Income Tax, 2002 (258) ITR 770 (SC) wherein the contours of Section 115-J and the normal provisions have been explained. It has been held that Section 115-J (1) commences with the non-obstante clause and provides for two stage assessment. The first stage requires computation of income under the normal provisions and the second stage requires computation of book profits as per provisions of Section 115-J. In case the income computed under the normal provisions is less than 30% of the book profits, then the assessee’s deemed total income chargeable to tax for the relevant previous year would be equal to 30% of the book profits. At the first stage, profits are computed under the normal provisions and deductions allowable under the Act have to be taken into consideration. The