LAKSHMI PRECISION SCREWS LTD.RTK vs. CI.T RTK

In the process he also referred to the provisions of section 205 (b) of the Companies Act, 1956 and observed that the Companies Act differentiated between the actual loss and loss after depreciation and that the assessee's contention that the loss in its case should be taken into consideration after providing for depreciation was not tenable. He, therefore, cancelled the assessment order passed by the Assessing Officer and directed him to make a fresh assessment according to law. The assessee filed an appeal against the said order before the Income Tax Appellate Tribunal and invited attention to the order of the Tribunal dated 31.1.1992 in ITA No.2170 (Del) 91 in the case of the assessee for the assessement year 1989-90 and submitted that the Tribunal had considered similar issue (as is involved in the present appeal for the assessment year 1988- 89) in the case of the assessee and observed that there were net losses in the assessment years 1985-86, 1986-87 and 1987-88 as a result of unabsorbed depreciation. It further observed that in that sense, there were no business loss, but only unabsorbed depreciation and since the lower of the two had to be allowed as a deduction, one view might be that no deduction should be allowed, because there was no business loss at all. It also observed that the other view which was equally plausible was that there were net losses in the said years of Rs.4,66,509, Rs.8,78,333 and Rs.62,04,642 and that the said net amounts, which in common parlance were called losses were less than the depreciation figures of Rs.45,00,334, Rs.69,98,196 and Rs.94,81,334 respectively. It also observed that the lower of the two were obviously figures of net losses and since two views were possible, the one favouring the assessee had to be preferred. It also observed that the case of the assessee was supported by the judgement of the Tribunal reported in 39 ITD 432. The Tribunal, therefore, directed the AO to deduct the amount of depreciation and on the resultant figure compute 30% of the profits u/s.115-J of the I.T.Act for the asstt. Year 1989-90. The learned counsel submitted that the Tribunal has accepted the claim of the assessee in relation to asstt. Year 1989-90. He further submitted that though a reference has been made to the Hon'ble High Court of Punjab and Haryana, the another cited as 201 ITR 1 (AT) and argued that the judgement of Hon’ble Andhra Pradesh High Court in the case of V.V. Trans-Investments (Pvt.) Ltd. vs. CIT, etc., 207 ITR 508 is not binding upon the Tribunal. However, the Tribunal after considering the rival contentions held that the issue stood covered by the decision of the Hon’ble Andhra Pradesh High Court in the case of V.V. Trans- Investments (supra) and therefore declined to interfere with the order of the Commissioner of Income Tax. The assessee filed an application under Section 256 (1) of the Income Tax Act 1961 seeking reference of the questions of law to this Court as under:- ”(1) Whether the Tribunal is correct in law in upholding the order passed by the learned CIT under Section 263 of the IT Act holding that the claim of the assessee company that the cash loss alone should be taken into consideration before providing for depreciation is correct and sustainable. (2) Whether the Tribunal is right in law upholding the order of the learned CIT passed u/s.263 by directing the AO to determine the book profit at Rs.19,09,097/- for the purpose of Section 115 J as against the book profit determined by the assessee company at a negative figure of Rs.1,64,54,112/-?” The Tribunal vide its order dated 21.2.1997 passed in RA No.705/ Del/96 in ITA No.3046/Del/91 referred the modified question as referred in para 1 of the judgement to this Court for its opinion. At the time of hearing, the learned counsel for the assessee submitted that the question of law referred to this Court is squarely covered in favour of the assessee by a decision of the Hon’ble Supreme Court in Surana out of appeal No.ITA No.2170 (Del) 91 for the assessment year 1989-90) wherein the similar question of law for the assessment year 1989-90 between the parties has already been answered in favour of the assessee and against the revenue. Learned counsel for the revenue has been unable to controvert this factual and legal position. Hence, in view of the decision of this Court in ITR No.125 of 1992 and the decision of the Hon’ble Supreme Court in Surana Steels Pvt. Ltd. (supra), the aforesaid question of law referred to this Court is answered in favour of the assessee and against the revenue. The instant reference stands answered accordingly. (RAKESH KUMAR GARG) JUDGE January 15, 2008 (SATISH KUMAR MITTAL) ps JUDGE