KWALITY BISCUITS LIMITED Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE Assistant Registrar of the Income-tax Appellate Tribunal has referred the following question of law arising out of its order dated March 3, 1994, in respect of the assessment year 1989-90, under Section 256(1) of the Income-tax Act, 1961 :

(2.) THE facts of the case are that the assessee is a manufacturing company and for the assessment year in question, its income was computed by invoking the provisions of Section 115J. While concluding the assessment, the Assessing Officer, for the purpose of applying the provisions of Section 205(1)(b) of the Companies Act held that the expression "loss" therein is before allowance of depreciation and not after deduction of depreciation. He also proceeded on the basis that even though the income as per the normal computation under the Income-tax Act led to a negative figure still the assessee was liable to pay advance tax and its failure t6 pay such advance tax would invite the levy of penal interest under Sections 234B and 234C. He also determined the amounts to be Carried forward to the subsequent year like losses, unabsorbed depreciation, etc., by making a notional assessment under Section 143(3) and on the basis that such an assessment was made he proceeded to determine the amounts to be carried forward as well as the written down value to be adopted for the subsequent year for the purpose of allowance of depreciation. While computing the profits for the purpose of Section 115J and making the adjustments thereof, as provided by law, the Assessing Officer did not deduct the sum of Rs. 83,61,301 written back to the profit and loss account for the accounting year relevant to the assessment year 1987-88 by reason of the change in the method of provision of depreciation by the assessee. THE assessee appealed. THE Commissioner (Appeals) held that the expression "loss" has to be considered after deducting therefrom depreciation. THE amounts to be carried forward to the subsequent year in respect of unabsorbed items were those which were in existence at the commencement of the accounting year. Similarly, written down value for the subsequent year has to be adopted at the value as at the commencement of the accounting year in respect of the assets in existence at that point of time. THE Commissioner (Appeals) did not approve of any adjustments in respect of the sum of Rs. 83,61,301. He upheld the levy of interest under Sections 234B and 234C. Both the assessee and the Department appealed. THE Tribunal, following the decision of the Andhra Pradesh High Court in W. P. No. 5408 of 1993, dated December 31, 1993 (reported as V. V. Trans-Investments (P.) Ltd. v. CIT [1994] 207 ITR 508), and disagreeing with the decision of the Special Bench of the Tribunal reported in Surana Steels Pvt. Ltd. v. Dy. CIT [1993] 201 ITR (AT) 1 (Hyd) held that the expression "loss" under Section 205 of the Companies Act must be interpreted so as to exclude depreciation. THE Tribunal also held that interest under Sections 234B and 234C can be charged. THE departmental appeal was allowed to the extent that the word "loss" excludes depreciation.

(3.) IN respect of the liability of interest under Sections 234B and 234C for the income which is determined under Section 115J, learned counsel appearing for the assessee has drawn our attention to the commentary from Kanga and Palkhivala's INcome TAX, eighth edition, volume I, wherein it is observed as below :