Law:

Section:

Section 115J of the Income-tax Act, 1961 - Zero-tax companies - Assessment year 1990-91 - Whether Assessing Officer does not have jurisdiction to go beyond net profit shown in profit and loss account which have been statutorily audited, approved by AGM and filed with Registrar of Companies who has certified its correctness, except to extent adjustments provided in Explanation to section 115J - Held, yes - Assessee-company returned net loss as per profits and loss account - Assessing Officer after making certain adjustments completed assessment at loss - Assessing Officer had also considered applicability of section 115J - Commissioner issued notice under section 263 to assessee and held that Assessing Officer ought to have recomputed book profit in terms of section 115J and 30 per cent of recomputed book profit ought to have been subjected to tax - Whether Commissioner had exceeded its jurisdiction to find order of Assessing Officer to be erroneous - Held, yes FACTS For the assessment year 1990-91, the assessee-company returned net loss as per profit and loss account and claimed adjustment on account of depreciation. The Assessing Officer, after making some adjustments, disallowed cetain part of claim in that regard. The Assessing Officer, however, allowed the depreciation on account of newly installed plant and machinery and completed the assessment under section 143(3) at loss. Assessing Officer had also considered the applicability of section 115J. Thereafter, Commissioner issued a notice under section 263 calling upon assessee as to why book profit might not be computed under section 115J and 30 per cent of the same be not taken as taxable income as subject to tax and holding that P&L Account of the assessee did not reflect the correct book profit, recomputed book profit of company by disallowing the claim of deprecation. On appeal, the Tribunal had affirmed the order of the Commissioner over-ruling the objection of the assessee that book profit shown in profit and loss account of the company prepared in terms of the Schedule VI of the Companies Act, 1956 was not open for recomputation by any authority under the Act except the permissible adjustments…

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