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C.I.T. v. M/S Kanodia (P) Ltd. - INCOME TAX REFERENCE No. 252 of 1992  RD-AH 1938 (16 August 2005)
Income Tax Reference No.252 of 1992
The Commissioner of Income Tax, Kanpur
v. M/s Kanodia Polychem (P) Ltd., Kanpur
Hon'ble R.K.Agrawal, J.
Hon'ble Rajes Kumar, J.
(Delivered by R.K.Agrawal, J.)
Sri S.K.Garg, learned counsel, states that he has not filed his appearance in this reference. We have checked the record and find that the assessee is unrepresented.
The Income Tax Appellate Tribunal, Allahabad has referred the following questions of law under Section 256(1) of the Income Tax Act, 1961 (hereinafter referred to as "the Act") for opinion to this Court:-
"Whether, on the facts and in the circumstances of the case, the I.TA.T. was justified in holding that for purposes of section 115J(iA)(iv) the word "loss" in terms of proviso to section 205(1)(b) of Companies Act will mean the loss including depreciation ?"
The reference relates to the Assessment Year 1989-90.
Briefly stated, the facts giving rise to the present reference are as follows:-
The assessee company filed return of income showing loss of Rs.63,500. As per Profit and Loss account filed alongwith the return, there was a net profit of Rs.4,06,619/- inclusive of depreciation of Rs.2,35,974/- debited to the Profit and Loss account. The Assessing Officer found that in view of the book profits, the Company was liable for tax under Section 115J of the Act. While applying the provision of Section 115J of the Act, the Assessing Officer gave working of book profits in the assessment order in which he allowed deduction of Rs.27,740/- being business loss for the assessment year 1985-86 which was found to be lower than the amount of depreciation calculated for the assessment years 1985-86 to 1988-89 as provided under Section 205 of the Companies Act. Aggrieved with the working of the computation of book profits, the assessee went in appeal and the Commissioner of Income Tax (Appeals), vide his order dated 30.8.1991, agreeing with the computation and interpretation of the Assessing Officer, decided the issue against the assessee. Being aggrieved, the assessee filed appeal before the Tribunal. The main issue before the Tribunal was to decide whether the word "loss" for the purposes of giving effect to the proviso to Section 205(i)(b) of the Companies Act will mean the loss including depreciation or loss excluding depreciation. The Tribunal observed that no doubt the above statutory provision was in the context of declaration of dividend by the Company, yet in view of specific language used in Section 115J(iA)(iv) of the Act full effect of the terms and expressions used in the Companies Act has to be accepted. The Tribunal further held that in case there are two views possible, the one more favourable to the assessee has to be accepted.
We have heard Sri A.N.Mahajan, learned Standing Counsel for the Revenue. No body has appeared on behalf of the respondent assessee.
We find that the controversy raised herein is squarely covered by a decision of the Apex Court in the case of Surana Steels Pvt. Ltd. v. Deputy Commissioner of Income Tax and others, (1999) 237 ITR 777, in which the Apex Court has held that the depreciation has to be taken into consideration while computing the book profit under Section 115J of the Act. Accordingly, there is no legal infirmity in the order of the Tribunal.
We accordingly answer question referred to us in affirmative i.e. in favour of the assessee and against the Revenue. However, there shall be no order as to costs.
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