Law: Income Tax Act, 1961

Section: 115

Indian Income tax Act 1961 - Section 115 J read with section 205 of the Companies Act, 1956 - Loss prosperous zero-tax companies- Assessment Incorporation of clause (b) of First Proviso to section 205(1) of Companies Act in clause (iv) of Explanation to section 115J of Income Tax Act. Term Loss used in companies Act - Meaning of- Nature and scope of loss during business - Adjustment of in book profit u/s 1151 Whether allowable - Question of law- Whether if loss was to be taken as pre-depreciation loss, then the resultant Computation will not be in conformity with the tenor of the provisions of section 205 Held yes - Whether word loss as used in proviso clause (b) to section 205( 1) signifies the amount arrived\at after taking into account the amount of depreciation and it had to be so read and understood in context of Section 115J of the Act - Held yes. Representations were made by and on behalf of the companies pointing out certain hardship to companies of new projects which have just begun to make profits and companies which having fallen sick were just turning around the corner. The Finance Minister introduced an amendment during the passage of the Finance Bill and said: There is merit in this suggestion. Under section 205 of the Companies Act, 1956, past losses or unabsorbed depreciation, whichever is less, are allowed to be set off against the book profits of the current year for determining profits for the purpose of declaring dividend. It is proposed to allow the same adjustments in computation of book profits for purposes the new provision for levy of minimum tax. As was stated by Ford Blackburn: When a single section of an Act of Parliament is Introduced into another Act,I think it must be read in the sense it bore in the original Act from which it was taken, and that consequently it is perfectly legitimate to refer to all the rest of that Act In order to ascertain what the section, meant, though those other sections are not incorporated in the new Act". Once we have ascertained the object behind the legislation and held that the provisions of section 205 quoted hereinabove stand bodily lifted and incorporated into the body of section 115J of the…

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