1998 (6) TMI 125

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....r: Asst. yr. Loss after depreciation Depreciation . Rs. Rs. 1984-85 2,66,335 2,51,858 1985-86 4,40,720 1,37,054 1986-87 2,74,415 1,17,517 1988-89 48,530 1,76,866 . 10,30,000 . 6,83,295 The AO did not agree with the assessee and he has worked out the deduction lower of the business loss excluding the depreciation and depreciation year-wise at Rs. 2,69,048 as under: Asst. yr. Business loss Depreciation loss Whichever is less . Rs. Rs. Rs. 1984-85 14,477 2,51,858 14,477 1985-86 3,03,666 1,37,054 1,37,054 1986-87 1,56,858 1,17,517 1,17,517 1987-88 -- -- -- 1988-89 -- 48,724 -- . . . 2,69,048 The assessee appealed to the CIT(A) relying upon the decision of this Bench of the Tribunal in ITA ....

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.... loss or the amount of depreciation which would be required to be set off against the profit of the relevant previous year as if the provisions of cl. (b) of the first proviso to sub-s. (1) of s. 205 of the Companies Act, 1956 (1 of 1956) are applicable." Sec. 205(1), cl. (b) of the first proviso to the Companies Act lays down as under: "If the company has incurred any loss in any previous financial year or years, which falls or fall after the commencement of the Companies (Amendment) Act, 1960, then the amount of the loss or an amount which is equal to the amount provided for depreciation for that year or those years whichever is less, shall be set off against the profits of the company for the year for which dividend is proposed to be d....

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.... incorporated the provisions of s. 205(1) of the Companies Act, 1956. Therefore, the meaning given to the terms 'loss' or 'depreciation' under the Companies Act shall be applied to the IT Act, 1961. The word 'loss' in proviso (b) to s. 205(1) would include depreciation. If the depreciation is to be excluded the legislature would have used the term 'cash loss'. In this regard reference is invited to s. 3(o) of the Sick Industrial Companies (Special) Provisions Act, 1985, wherein a distinction is made between 'accumulated loss' and 'cash loss'. We may also refer in this regard to the case Garden Silk Weaving Factory vs. CIT (1991) 94 CTR (SC) 136 : (1991) 189 ITR 512 (SC), in which the Hon'ble Supreme Court while interpreting the meaning of t....