TaxTMI 
TaxTMI 
2001 (11) TMI 16
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....anything and everything contained in sub-section (1) of section 115J. Section 115J is a special provision relating to certain companies. Sub-section (1) thereof, which opens with a non obstante clause, provides that in a case where the assessee is a company other than a company engaged in the business of generation or distribution of electricity, and its total income as computed under the Act in respect of any previous year relevant to the assessment year commencing on or after April 1, 1988, but before April 1, 1991, is less than thirty per cent. of its book profit, the total income of such assessee chargeable to tax for the relevant previous year shall be deemed to be an amount equal to thirty per cent. of such book profit. Sub-section (1A) requires such companies to whom section 115J(1) applies, to prepare their profit and loss account for the relevant previous year in accordance with the provisions of Parts II and III of Schedule VI to the Companies Act, 1956. The Explanation to sub-section (1A) sets out the manner in which the book profit is to be determined. "Book profit", for the purpose of the section, is stated to mean the net profit as shown in the profit and loss accou....
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....such book profit by deeming the same to be the income even when the result of the normal computation shows an income which is less than thirty per cent. will affect the determination of the carry forward amounts, which is to be done as if section 115J(1) had not been attracted to the case of the assessee. Mr. T. N. Seetharaman, learned counsel for the assessee, whose case has been accepted by the Tribunal, which has held that to the extent of thirty per cent. of the book profit which has suffered tax under section 115J(1), the assessee should be deemed not to have enjoyed the benefit of the set off of the carried forward losses and other adjustments permissible against profits in the years in which section 115J(1) was applicable, submitted that the word "affect" in sub-section (2) should be and can only be understood as meaning "affect adversely" and the section so construed could only mean that the assessee should not be deprived of the benefit of setting off the losses against the profits in succeeding years by carrying forward the unadjusted losses to the extent of thirty per cent. in the years, in which its total income fell below thirty per cent. of the book profit, and that....
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....orward loss and other adjustable amounts against the profits of the year and thereby reduce the liability of the assessee for payment of tax to the extent the carried forward losses and adjustable amounts are set off against the profits. The fact that by reason of the application of section 115J(1) the assessee had paid tax on thirty per cent. of the book profit is not a factor of any relevance, so far as the computation referred to in sub-section (2) is concerned. The reference to "previous year" in sub-section (2), in the context, can only refer to every previous year in which the assessee seeks to carry forward the loss and other adjustable sums. The carry forward is a process which proceeds in a continuum. The amount to be carried forward in the succeeding year being based upon the amount carried forward at the commencement of the year, and the further loss or other adjustable amounts, if any, that the assessee may be entitled to add to that carried forward figure. The Act does not in any of its provisions visualise interruption in this process or suspending a part of the continuum and treating the adjustment as not having been made, even when the computation would show that ....
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....v. Union of India [1997] 223 ITR 713, wherein a Division Bench of the Andhra Pradesh High Court, in an elaborate judgment, considered section 115J as also a circular that had been issued by the Central Board of Direct Taxes giving certain illustrations as to the way in which that section is to be applied and took a view similar to the one taken by us in the foregoing paragraphs and held that on the determination of the taxable income under the relevant provisions of the Act whatever amounts remained to be carried forward as per regular computation, either by way of unabsorbed losses or unadjusted allowances, etc., the same has to be carried forward to the next year, ignoring the fact that a notional income is made taxable under sub-section (1). Learned counsel for the assessee also submitted that section 115J(2) has to be understood also in the light of what Parliament did subsequently by enacting section 115JAA, which provides for tax credit in respect of tax paid on deemed income under section 115JA(1), section 115JA having revived the tax on book profits after an interval of several years with effect from April 1, 1997. It is not possible to interpret the earlier provision wit....
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....the said provision for the next following assessment year and be deemed to be part of the deduction admissible to the assessee under the said provision for that year or, if no such deduction is admissible to the assessee for that year, be deemed to be the deduction admissible to the assessee for that year and so on for succeeding assessment years. There are striking differences between what is provided in section 80VVA and that provided for under section 115J. While section 115J(2) refers to sections 32, 32A, 72, 73, 74 74A and 80J, section 80VVA(2) does not refer to sections 32, 72, 73, 74 and 74A. Section 115J(2) does not refer to several other provisions such as sections 35, 35C, 35CC, 35CCA, 35CCB, 32AB, 80G, 80HH, 80GGA, 80HHA, 80HHB, 80HHC, 80-I, 80N, 80-O and 80Q. There is no provision in section 115J similar to that found in sub-section (4) of section 80VVA. As section 115J was introduced with effect from April 1, 1988, in place of section 80VVA, it may be presumed that Parliament had deliberately changed the scheme by not referring to many of the provisions set out in section 80VVA(2) in section 115J(2) and completely omitting to include in section 115J a provision simila....