Tribunal rules no tax on profit, depreciation included in loss calculation under section 115J for 1988-89 assessment year.

The Tribunal ruled in favor of the assessee, concluding that no profit was liable to tax under section 115J for the assessment year 1988-89. The Tribunal held that the Assessing Officer's interpretation, which excluded depreciation from the calculation of loss, was incorrect. The Tribunal emphasized that loss should include depreciation for deduction from net profit, contrary to Circular No. 495 issued by the CBDT. Consequently, the appeal was allowed, and the tax assessment under section 115J was deemed unjustified for that assessment year.

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Issues Involved:
The appeal concerns the computation of tax payable u/s 115J for the assessment year 1988-89 based on the net profit and business losses of the assessee-company.

Summary of Judgment:

Issue 1 - Interpretation of Section 115J:
The Assessing Officer computed the tax payable u/s 115J based on the net profit and business losses of the assessee. The CIT(A) upheld this calculation, stating that the book profit should be reduced by the amount of loss or depreciation as per the provisions of section 205(1)(b) of the Companies Act, 1956. The Tribunal considered the arguments of the assessee's counsel, who contended that no tax was payable u/s 115J. The Tribunal analyzed the relevant provisions and held that the Assessing Officer's interpretation was incorrect, as the word 'loss' should be taken to include depreciation. Citing a Supreme Court decision, the Tribunal ruled in favor of the assessee, concluding that there was no profit liable to tax under section 115J for the assessment year in question.

Issue 2 - Application of Circular No. 495:
The Departmental Representative referred to Circular No. 495 issued by the CBDT, which explained the application of section 115J. The Circular considered loss as excluding depreciation, similar to the method adopted by the Assessing Officer in the assessment order. However, the Tribunal's interpretation differed, emphasizing that loss should include depreciation for the purposes of deduction from net profit. The Tribunal held that the Assessing Officer's working was not in accordance with the correct interpretation of the law, leading to the allowance of the appeal.

In conclusion, the Tribunal allowed the appeal, ruling that the Assessing Officer was not justified in levying tax under section 115J for the assessment year 1988-89.

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