Law: Income Tax Act, 1961

Section: 115

Income-tax---Company---Deemed income---Unabsorbed depreciation---Unabsorbed business loss---Set off---Reference---Computation of income for purpose of S.115-J---Expression "the amount of loss" appearing in cl. (b) of first proviso to subsection (1) of S.205 of Companies Act, 1956---Whether includes unabsorbed loss and unabsorbed depreciation of earlier year or either of two, whichever is less---Question of law fit for reference---Indian Income Tax Act, 1961, Ss.115-J & 256(2)---Indian Companies Act, 1956, S.205(1), proviso, cl. (b). Section 115-J of the Income Tax Act, 1961, requires preparation of the profit and loss account by the company according to the provisions of clause (b) of the first proviso to subsection (1) of section 205 of the Companies Act, 1956. Thereafter, unabsorbed business loss or unabsorbed depreciation of earlier years, whichever is less, is allowable as deduction from the profits for arriving at the book profit, thirty per cent. of which will be deemed as income chargeable to tax. The net profit of the assesee-company for the assessment year 1990-91, according to the profit and loss account, was Rs.36,70,693. The unabsorbed business loss of the assessee was Rs.3,64,769 and unabsorbed depreciation was Rs.1,34,20,719. The Assessing Officer deducted business loss and computed the book profit at. Rs.33,09,924 and the income for the purpose of section 115-J at the rate of 30 per cent on this amount was worked out at Rs.9,91,777. This was confirmed on appeal by the Commissioner (Appeals). The Tribunal, however, held that the expression "the amount of loss" appearing in clause (b) of the first proviso to sub¬section (1) of section 205 of the Companies Act, 1956, must necessarily include the amount of depreciation and unabsorbed depreciation. Accordingly, the .Tribunal reduced unabsorbed depreciation in place of unabsorbed business loss, which resulted in nit income. On an application to direct reference: Held, that the question whether, while assessing the income chargeable to tax under section 115-J(1-A) of the Act, the expression "the amount of loss", appearing in section 205(1), proviso, clause (b) of the Companies Act, 1956, could…

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