- (1.) This is a batch of eight matters before this Court. The routes through which the different matters travelled up to the High Court were different. Some were reference applications under Section 256 (1) of the Income-tax Act, 1961 and some were writ petitions filed before the High Court. All the matters have stood disposed of consistently with the view taken by the Division Bench of the High Court of Andhra Pradesh in the leading judgment which is reported as V.V. Trans-Investments (P) Ltd. v. Commr. of Income-tax, (1994) 207 ITR 508 : (1994 Tax LR 503) and also impugned herein. In all the matters the question arising for decision is in substance only one whether the term 'loss' as appearing in Section 205 (1), first proviso, clause (b) of the Companies Act, 1956 read with Section 115-J of the Income-tax Act, 1961 means "including depreciation."
(2.) In order to appreciate the bone of contention it would suffice to state the facts relevant to one of the assessee's namely M/s. V.V. Trans-Investments (P) Ltd., Hyderabad, a private limited company. The figures of net profit and loss as per the profit and loss account of the company were as follows: Assessment year profit/loss Depreciation debited to P and L account Rs. Rs. 1987-88 (+) 3.087 __ 1988-89 (+) 35,79,997 67,75,759 (Profit before depreciation) (-) 31,95,762 (Loss after depreciation) 1989-90 (+) 28,37,947 3,534
(3.) The assessee-company had filed its return of income disclosing 'nil' income after setting off a part of arrears of depreciation against the current year's profit of Rs. 28,37,947/-. The contention of the assessee was that for the accounting year relevant to the assessment year under consideration, there was no book profit after adjustment of the earlier years loss against the current year's profit. The Income-tax Officer, however, computed the book profit under Section 115-J of the Income-tax Act at Rs. 8,51,380/-, being 30 per cent. of the current year's profit of Rs. 28,37,947/- as per the profit and loss account. According to the Income-tax Officer, for arriving at the adjusted book profit, unabsorbed depreciation or business loss, whichever is less, is to be adjusted. Since there was no business loss in earlier years as per the books of account, the amount to be set off was considered as 'nil', whereas the assessee contended that earlier year's loss of Rs. 31,94,136/- which in fact was unab-sorbed depreciation, was to be deducted from current year's profit of Rs. 28,37,947/- before arriving at the book profit under Section 205(1), first proviso, clause (b) of the Companies Act, 1956.;