COMMISSIONER OF INCOME TAX Vs. M/S PRAKASH TUBES LIMITED

ITA No. 52/2000 Page 1 of 5

$~Part II-B (R-23)

* IN THE HIGH COURT OF DELHI AT NEW DELHI

+ INCOME TAX APPEAL NO. 52/2000

Date of decision: 21st August, 2013

COMMISSIONER OF INCOME TAX

..... Appellant

Through Mr. Abhishek Maratha, Sr. Standing

Counsel.

Versus

M/S PRAKASH TUBES LIMITED

..... Respondent

Through Mr. Prakash Kumar, Advocate.

CORAM:

HON'BLE MR. JUSTICE SANJIV KHANNA

HON'BLE MR. JUSTICE SANJEEV SACHDEVA

SANJIV KHANNA, J. (ORAL):

This appeal by the Revenue under Section 260A of the Income

Tax Act, 1961(Act, for short) relates to Assessment Year 1989-90.

The following substantial question of law was admitted for hearing

vide order dated 30th November, 2000:-

“Whether the Tribunal has correctly interpreted

the provisions of Section 115-J so far as mode ITA No. 52/2000 Page 2 of 5

of computation of income is concerned?”

2. The respondent-assessee is a limited company and for the year

under consideration it has filed its return declaring income of

Rs.91,25,683/- under Section 115-J of the Act. The assessee, however,

had claimed that it was entitled to carry forward its loses including

investment allowance of Rs.2,19,04,511/- as its taxable income was

being assessed on the basis of book profits under Section 115-J and not

under the normal provisions.

3. The Assessing Officer did not agree, observing that the

computation of income under Section 115-J of the Act does not effect

the determination of the amount to be carried forward to the

subsequent year under the normal provisions. The Assessing Officer

also made other additions while assessing the taxable income under the

normal provisions.

4. Commissioner of Income Tax (Appeals) agreed with the

Assessing Officer on the question of carry forward of loses, including

investment allowance. He, however, allowed some relief to the

respondent-assessee on additions made under the normal provisions.

5. Aggrieved, the respondent-assessee preferred an appeal before

the tribunal. No appeal was preferred by the appellant-Revenue

against the order passed by the CIT(Appeals).

6. Income Tax Appellate Tribunal by the impugned order dated ITA No. 52/2000 Page 3 of 5

16th August, 1999 followed its earlier order for the preceding year

1988-89, which in effect means that the appeal filed by the respondentassessee was allowed. In other words, the stand of the respondentassessee that they were entitled to carry forward of unabsorbed losses,

including investment allowance was accepted in view of the fact that

income taxable had been computed on book profits under Section 115-

J and not under the normal provisions.

7. The aforesaid view of the tribunal is not in consonance with the

authoritative pronouncement of the Supreme Court in Karnataka

Small Scale Industries Development Corporation Limited versus

Commissioner of Income Tax, 2002 (258) ITR 770 (SC) wherein the

contours of Section 115-J and the normal provisions have been

explained. It has been held that Section 115-J (1) commences with the

non-obstante clause and provides for two stage assessment. The first

stage requires computation of income under the normal provisions and

the second stage requires computation of book profits as per provisions

of Section 115-J. In case the income computed under the normal

provisions is less than 30% of the book profits, then the assessee’s

deemed total income chargeable to tax for the relevant previous year

would be equal to 30% of the book profits. At the first stage, profits

are computed under the normal provisions and deductions allowable

under the Act have to be taken into consideration. The