ESTER INDUSTRIES LIMITED Vs. UNION OF INDIA

JUDGEMENT

(1.) This is a writ petition filed by the petitioner challenging the provisions of Section 115JA and 115JAA of the Income Tax Act, 1961 (hereinafter referred to as the 'Act') as being ultra vires Article 265, 300A, 14 & 19(1)(g) of the Constitution of India.

(2.) The petitioner is a public company incorporated under the Companies Act, 1956 and is, inter alia, engaged in the business of manufacture and sale of Polyester Chips, Polyester Film, Polyester Filament Yarn, Methanol and Engineering Plastics. The petitioner filed its return for the assessment year 1997- 98 showing an income of Rs. 12,42,63,001/-. However, the income tax payable by the petitioner for the said assessment year was shown as Nil on account of unabsorbed depreciation which was brought forward from previous assessment years. The Finance (No. 2) Act, 1996 introduced Section 115JA in the Income Tax Act, w.e.f. 01.04.1997 which provided for levy of a minimum tax on assessees who although had declared profits as per their books but were not liable to pay tax on the profits as disclosed in their final accounts on account of certain deductions available under the Act. The petitioner is one such company who although, earning substantial profits, is not be liable to pay tax under the normal computation provisions of the Act on account of unabsorbed depreciation brought forward from previous years. Aggrieved by enactment of Section 115JA providing for an alternate measure of taxable income, the petitioner has challenged the provisions of Section 115JA of the Act as being ultra vires the Constitution of India.

(3.) The petitioner has also challenged the provisions of Section 115JAA of the Act which provides for grant of credit in respect of tax paid by an assessee under section 115JA of the Act from the tax payable in subsequent years subject to a maximum period of 5 succeeding assessment years and subject to the assessee paying the minimum alternative tax calculated in accordance with Section 115JA of the Act for the respective years. In terms of Section 115JAA of the Act, the unabsorbed credit would lapse after 5 assessment years.