M/S.APPOLLO TYRES LTD., vs. THE COMMISSIONER OF INCOME TAX,

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ITR/167/1998HC KeralaKLHC01014838199827 November 2018Author: HONOURABLE MR.JUSTICE K.VINOD CHANDRAN,HONOURABLE MR. JUSTICE ASHOK MENON4 pages
AI SummaryDismissed

What did the High Court hold?

The High Court answered all three questions of law against the assessee and in favour of the Revenue. The Court's decision was based on the judgment of the Hon'ble Supreme Court in Karnataka Small Scale Industries Development Corporation Ltd. v. C.I.T. [(2002) 258 ITR 258 (SC)]. The ratio decidendi from the Supreme Court's ruling was applied to hold that the unabsorbed depreciation and losses of earlier years were not to be reduced from the book profits computed under Section 115J. Consequently, the assessee's claim for such reduction was rejected, and the income from other sources was not to be assessed separately after setting off unabsorbed depreciation. The operative direction was to answer the reference as per the Supreme Court's precedent.

What were the facts?

This Income Tax Reference (ITR) for the assessment year 1989-90 was filed by the assessee, M/s. Appollo Tyres Ltd., against the order of the Income Tax Appellate Tribunal, Cochin Bench. The reference arises from an appeal before the Tribunal (ITA No. 339(COCH)/1993) which in turn stemmed from a Rectification Application (RA No. 234(COCH)/95). The core of the dispute revolves around the calculation of book profits under Section 115J of the Income Tax Act, 1961, specifically concerning the treatment of unabsorbed depreciation and losses from earlier years. The assessee sought to reduce the amount subject to tax under Section 115J by these carried forward amounts.

What were the issues?

The Tribunal had to decide three questions of law: 1. Whether, under Section 115J(1) and 115J(2), the Tribunal erred in not reducing the amount of unabsorbed and adjusted carried forward depreciation and losses of earlier years by Rs.1,83,94,192/- representing adjusted book profits subjected to tax under Section 115J. 2. Whether, on the facts and circumstances, the carry forward of unabsorbed depreciation and losses of earlier years, adjustable against current year's income other than deemed total income under Section 115J, should be reduced by the amount of such deemed income, with only the balance carried forward. 3. Whether income from other sources was liable to be assessed separately without setting off unabsorbed depreciation against it. The assessee contended that the unabsorbed depreciation and losses should be reduced from the book profits. The Revenue's contentions are not explicitly detailed in the provided text, but the questions framed indicate the dispute over the adjustment of brought forward losses and depreciation against book profits under Section 115J.

Which sections of the Income-tax Act were involved?

Section 115J

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, COCHIN BENCH, COCHIN

Vinod Chandran, J: The reference arises at the instance of the assessee, for the year 1989-90. The following questions of law are raised:

"

1.

Whether on a proper construction of the provisions of section 115J(1) and 115J(2), the Tribunal did not err in law in not reducing the amount of unabsorbed

and adjusted

carried

forward depreciation and losses of earlier years by a sum of Rs.1,83,94,192/- representing the adjusted book profits subjected to tax under the provisions of section 115J?

2.

Whether on the facts and in the circumstances of the case the carry forward of the unabosrbed depreciation and the losses of the earlier years adjustable against the current year's income, other than the deemed total income computed u/s.115J, are required to be reduced by the amount of such deemed income and only the balance amount is to be carried forward to later years?

3.

Whether the income from other sources was liable to be assessed separately without setting off of the unabsorbed depreciation against such income?”

2.

The questions of law are answered against the assessee and in favour of the Revenue, by virtue of the judgment of the Hon'ble Supreme Court in Karnataka Small Scale Industries Development Corporation Ltd. v. C.I.T. [(2002) 258 ITR 258 (SC)]. The questions of law referred are answered accordingly. K.VINOD CHANDRAN JUDGE ASHOK MENON JUDGE Vku/- - 4 -

Appendix — schedule of exhibits
APPENDIX APPLICANT'S ANNEXURES: ANNEXURE A TRUE COPY OF THE ASSESSMENT ORDER DATED 7.2.1992 ANNEXURE B TRUE COPY OF THE APPELLATE ORDER OF GROUND OF DECISION DATED 12.2.93 ANNEXURE C TRUE COPY OF THE ORDER IN ITA.339(COCH)/93 DATED 25.5.95. Vku/- [ true copy ]

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