- (1.) ON an application under S. 256(1) of the IT Act, 1961, Tribunal has referred the following question for the opinion of this Court : "Whether, on the facts and in the circumstances of the case and on a proper interpretation of s. 115J(2) of the Act, the Tribunal was right in law in holding that the unabsorbed losses/allowances to the extent of Rs. 15,78,210 relating to the asst. yrs. 1983-84, 1986-87, 1987-88 and 1990-91 were eligible to be set off against the income for the asst. yrs. 1991-92 ?"
(2.) THE assessment for the asst. yr. 1989-90 was made by invoking the provision of S. 115J and the assessee's total income in accordance with that section was determined at Rs. 9,74,816, for the asst. yr. 1990-91 the income was also similarly determined at Rs. 6,73,920 under the same provision. The provision of S. 115J were omitted w.e.f. 1st April, 1991, i.e., from the asst. yr. 1991-92 i.e., the relevant assessment year in the case in hand. In the year under appeal while computing the assessment under S. 143(3) assessee claimed that an amount of Rs. 15,78,210 was available to it as unabsorbed investment allowance and unabsorbed business loss/depreciation for being set off against the income for asst. yr. 1991-92. The ITO set off only Rs. 72,560 which represents unabsorbed investment allowance against the income of the assessee for asst. yr. 1991-92. According to him, in the asst. yrs. 1989-90 and 1990-91 the entire unabsorbed business loss/depreciation and investment allowance had been adjusted, save and except the investment allowance of Rs. 72,560 which alone can be set off against the income of asst. yr. 1991-92. He, therefore, rejected the assessee's claim for set off of the unabsorbed loss and allowance amounting to Rs. 15,78,210. In appeal before the CIT(A), CIT(A) confirmed the view taken by the AO, though on different ground. In appeal before the Tribunal, the Tribunal has allowed the claim of the assessee. According to the Tribunal, sub-s. (2) clarified that consequence of applying the deemed provision of sub-s. (1) would not be that the assessee-company would also lose its right to have the aforesaid allowance and loss for that year determined and carried forward to the subsequent year. Tribunal also pointed out that there was an arithmetical mistake committed by the AO, holding that the loss were set off in the earlier years. None appeared for the assessee. We heard learned counsel for the Revenue. Learned counsel for the Revenue Mr. Dutt submits that once there is a non obstante clause in sub-s. (1) of S. 115J the income shall be determined as per sub-s. (1) of S. 115J.
(3.) SUB -s. (1) of S. 115J provides a fiction for taking the deemed income. That provides that though as per the provision of the Act in computing the income, income may come at nil. But in such cases, in case of companies referred in sub-s. (1) while computing the income of the previous year, after first day of April, 1988, and before the first day of April, 1991, if the income computed as per the provision of the Act is less than 30 per cent of the book profits in such cases the 30 per cent of the book profit shall be taken as deemed income for the purpose of income-tax. Sub-s. (2) further provides nothing contained in sub-s. (1) shall affect the determination of amount in relation to the relevant previous year to be carried forward to the subsequent year or years under the provisions of sub-s. (2) of S. 32 or sub-s. (3) of S. 32A or cl. 2(ii) of sub-s. (1) of S. 72 or s. 73 or S. 74 or sub-s. (3) of S. 74A, or sub-s. (3) of S. 80J. The income shall be computed in respect of the deemed income and the deductions provided under the sections referred in sub-s. (2) are to be taken into account for the purpose of ascertaining the loss, if any, and that has to be allowed to carry forward to be set off in the subsequent year or years. That clearly shows that the legislature has intended though even the income may not be taxable under the provision of the Act but if the income is less than 30 per cent of the book profit if computed in accordance with the provisions of the Act, 30 per cent of the book profit be taken as a deemed income. But for that assessee should not suffer and that has been taken care of by allowing the loss which assessee suffered on account of not allowing the deductions for which the assessee is entitled under the Act. That has to be ascertained on allowing all these deductions and whatever the net loss comes on taxing the 30 per cent of book profit that has to be allowed to carry forward and be allowed to set off against the income of subsequent year or years.;