IN RE: RASHTRIYA ISPAT NIGAM LTD. Vs. STATE

JUDGEMENT

(1.) IN this case an application Under Section 245Q(1) of the Income -tax Act, 1961, (hereinafter referred to as the "Act"), seeking advance ruling from the Authority has been filed on November 29, 2004. The applicant is a company registered under the Companies Act and being an undertaking of the Government of India, is a public sector company. The applicant was registered during 1982 (assessment year 1982 -83) and it commenced its commercial operations during the previous year 1990 -91 (assessment year 1991 -92). During the previous years 1990 -91 to 1993 -94, 1998 -99 and 1999 -2000, the applicant had operational loss from business excluding depreciation, which could not be set off in the absence of profits. In respect of the years 1994 -95 to 1997 -98, 2000 -01 and 2001 -02, the applicant had operational profit.

(2.) UNDER Section 115JB, where in the case of an assessee being a company, the income -tax payable on the total income as computed under the "Act" in respect of any previous year relevant to the assessment year commencing on or after April 1, 2001, is less than 7Vi per cent, of the book profit, such book profit shall be deemed to be the total income of the assessee and the tax payable by the assessee on such total income shall be at 71/2 per cent. Sub -section (2) of Section 115JB requires every assessee, for the purpose of the said section, to prepare its profit and loss account for the relevant previous year in accordance with the provisions of Parts II and III of Schedule VI to the Companies Act, 1956 subject to certain adjustments set out therein. The Explanation under Sub -section (2) defines "book profit" and requires the net profit shown in the profit and loss account as prepared under Sub -section (2) to be reduced by the amount of loss brought forward or unabsorbed depreciation whichever is less, amongst various other adjustments. The provisions of the Explanation shall continue to apply for the subsequent years so long as the amount of loss brought forward or unabsorbed depreciation does not become nil.

(3.) FOR the financial year 2003 -04 (assessment year 2004 -05) the applicant reported a profit of Rs. 1,547 crores (approximately), During the said year, the total brought forward loss of Rs. 4,461 crores (approximately) shown in the profit and loss account by the applicant comprises of business loss of Rs. 1,755 crores (approximately) and unabsorbed depreciation of Rs. 2,706 crores (approximately), the profit of Rs. 521 crores (approximately) for the financial year 2002 -03 (assessment year 2003 -04) having been adjusted against the unabsorbed depreciation. It is stated by the applicant that, in terms of Sub -section (2) of Section 115JB the current year's profit has to be reduced by the business loss or unabsorbed depreciation, whichever is less and accordingly the book profit for the financial year 2003 -04 (assessment year 2004 -05) would be nil. The applicant, therefore, would not be liable to pay any advance tax for the assessment year 2004 -05.