M/S LAXMI PIPES P LTD. vs. CIT RTK

ITR/113/1997HC Punjab & HaryanaPHHC01035351199705 April 2007Author: MR. JUSTICE RAJESH BINDAL,MR. JUSTICE M.M. KUMAR7 pages
AI SummaryAllowed

What did the High Court hold?

The High Court held that the Tribunal had committed an error of law by refusing to take into account unabsorbed depreciation while working out the book profit under Section 115J of the Income-tax Act, 1961. The Court relied on the Supreme Court's decision in M/s Surana Steels Pvt. Ltd. v. Deputy Commissioner of Income-tax, which held that the term 'loss' in clause (b) of the proviso to Section 205(1) of the Companies Act, 1956, must be understood as the amount arrived at after taking into account depreciation. The Court reasoned that this interpretation aligns with the object of Section 115J and the plain reading of Section 205(1)(b), which refers to 'the amount provided for depreciation' and 'arrived at in both cases after providing for depreciation'. Therefore, the reference was answered in favour of the assessee, directing that unabsorbed depreciation should be considered in computing the book profit.

What were the facts?

The assessee, M/s Laxmi Pipes Pvt. Ltd., filed its return for assessment year 1989-90, declaring a loss. The Assessing Officer disallowed the deduction of earlier years' allowances, relying on CBDT circular No. 495, and computed the assessee's income under Section 115J of the Income-tax Act, 1961, at 30% of its book profit. The Commissioner of Income-tax (Appeal) and the Income-tax Appellate Tribunal upheld the Assessing Officer's order. The Tribunal's order dated 31.12.1996 was challenged. The High Court was asked to decide a reference question arising from the Tribunal's order.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that 'loss' mentioned in clause (b) of the first proviso to Sub-section (1) of Section 205 of the Companies Act, 1956, read with Section 115J of the Income-tax Act, 1961, does not include 'unabsorbed depreciation'? (Question of law) Assessee's contention: The assessee argued that the Supreme Court in M/s Surana Steels Pvt. Ltd. v. Deputy Commissioner of Income-tax had clarified that the word 'loss' in Section 205(1)(b) of the Companies Act signifies the amount arrived at after taking into account depreciation, as depreciation is provided for in the profit and loss account. Revenue's contention: The revenue's counsel could not seriously dispute that the Supreme Court judgment in M/s Surana Steels would be applicable and decide the controversy in favour of the assessee.

Which sections of the Income-tax Act were involved?

Section 115J,Section 205(1)(b)

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
I.T.R. No.113 of 1997 1 In the High Court of Punjab and Haryana, Chandigarh. I.T.R. No.113 of 1997 Date of Decision: 5.4.2007 M/s Laxmi Pipes Pvt.Ltd., Hisar …Applicant. Versus Commissioner of Income-tax (A), Rohtak …Respondent. CORAM: HON’BLE MR.JUSTICE M.M.KUMAR HON’BLE MR.JUSTICE RAJESH BINDAL Present: Mr.Akshay Bhan, Advocate for the Petitioner-Assessee. Mr.Yogesh Putney, Advocate for the Respondent-Revenue.

JUDGMENT M.M.KUMAR, J. On the application made by the assessee, seeking reference of various questions of law arising out of the order dated 31.12.1996 passed in I.T.A. No.562/Delhi/92 in respect of assessment year 1989-90, the Income-tax Appellate Tribunal has referred only the following question of law for the opinion of this Court:- “Whether on the facts and in the circumstances of the case, the Tribunal was justified in holding that “loss” mentioned in clause (b) of the first proviso to Sub-section (1) of Section 205 of the Companies Act, 1956 read with Section 115J of the I.T. Act,

I.T.R. No.113 of 1997 2 1961 does not include “unabsorbed depreciation”?

It is appropriate to mention that the assessee had filed its return declaring a los

The order continues below.

Read the full judgment

A free account opens 10 full judgments a month. Re-reading one you have already opened does not count again.

Create a free accountSign in

See plans and prices

The summary, the parties, the sections and the citations above are open to everyone and always will be. Only the text of the order and the PDF are metered.

More judgments on Section 115J

All 67 judgments and leading authorities on Section 115J →

Recent GST High Court judgments

Search GST case law →