Gujarat High Court Case Information System
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SCA/11581/2008 41/ 41 JUDGMENT
IN
THE HIGH COURT OF GUJARAT AT AHMEDABAD
SPECIAL
CIVIL APPLICATION No. 11581 of 2008
For
Approval and Signature:
HONOURABLE
MR.JUSTICE D.A.MEHTA
HONOURABLE
MS.JUSTICE H.N.DEVANI
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1
Whether
Reporters of Local Papers may be allowed to see the judgment ?
2
To
be referred to the Reporter or not ?
3
Whether
their Lordships wish to see the fair copy of the judgment ?
4
Whether
this case involves a substantial question of law as to the
interpretation of the constitution of India, 1950 or any order
made thereunder ?
5
Whether
it is to be circulated to the civil judge ?
=========================================
CAIRN
EXPLORATION (NO.7) LTD & 1 - Petitioner(s)
Versus
UNION
OF INDIA & 2 - Respondent(s)
=========================================
Appearance :
MR
C.J.AGARWAL, Senior Advocate with Mr.TUSHAR P HEMANI
for Petitioners
MR PS
CHAMPANERI for Respondents : 1,
MR MR BHATT, SR.ADVOCATE with MRS
MAUNA M BHATT for Respondents : 2 -
3.
=========================================
CORAM
:
HONOURABLE
MR.JUSTICE D.A.MEHTA
and
HONOURABLE
MS.JUSTICE H.N.DEVANI
Date
: /10/2010
CAV
JUDGMENT
(Per
: HONOURABLE MS.JUSTICE H.N.DEVANI)
This
petition under Article 226 of the Constitution of India has been
filed with the following substantive prayers:
“[17] The
petitioner, therefore, prays that this Hon’ble Court be pleased to
issue a writ of mandamus or a writ in the nature of mandamus or a
writ of certiorari or a writ in the nature of certiorari or any other
appropriate writ, direction or order and be pleased to:
[a] declare
the provisions of clause (iii) of Explanation 1 of section 115JB of
the Act as ultra vires the Constitution and liable to be struck down;
[b] restrain
the Respondents from giving effect to the provisions of clause (iii)
of Explanation 1 of section 115JB of the Act;
[c] issue
writ of mandamus or an order directing the respondent No.2 & 3 to
allow the reduction of the brought forward losses of
Rs.11,67,85,411/- of the petitioner company from the net profit in
order to compute the book profit under the MAT provisions (i.e. 115
JB of the Act) of the Income Tax Act, 1961 in the absence of any
unabsorbed depreciation in respect of the assessment year 2008-2009;”
The
facts as appearing in the petition are that the petitioner is a
Private Company, limited by shares, incorporated in Scotland, U.K.
under the Companies Act, 1985 and is a subsidiary of M/s Cairn India
Holdings Ltd., a company registered in Jersey Channel Island. The
petitioner No.1 Company is primarily engaged in the business of
prospecting, drilling, exploring, producing and generally dealing in
minerals, oils, gas and other related by-products. On 23.09.2005,
the petitioner company, entered into a Production Sharing Contract
(PSC) with the Government of India and, Oil & Natural Gas
Corporation Ltd. (ONGC) for the exploration of natural resources.
According to the PSC, the petitioner had a 49% participating
interest in the contract area and, therefore, the petitioner company
formed an Unincorporated Joint Venture (UJV) with other co-venturers
to carry out the operations under the PSC. The petitioner company
had no other business in India except the aforesaid participating
interest in the UJV. For the financial year ending 31.3.2006, the
petitioner company incurred expenditure of Rs.8,17,245/- on
exploration, as its proportionate share in the UJV. According to
the petitioner, the business of prospecting, drilling, exploring,
producing and generally dealing in minerals, oils, gas and other
related by-products is a capital intensive industry in initial years
and, therefore, the companies of this industry, in accordance with
Generally Accepted Accounting Principles (GAAP) reflect investments
in oil well as expenditure incurred during the year in the financial
statements. Therefore, the investments made before production of oil
is though actually work-in-progress, but the same is claimed as
expenditure for the year in accordance with Guidance Note issued by
the Institute of Chartered Accountants of India on Accounting for
Oil and Gas Producing Activities.
Accordingly,
while preparing the profit and loss account for the financial year
ending 31.3.2006, the petitioner company, out of the above
exploration expenditure of Rs.8,17,245/- debited profit and loss
account by a sum of Rs.7,33,264/- apart from operating expenses of
Rs.75,000/-. Since there was interest income of Rs.1,509/-, the
petitioner company, for the financial year ending 31.03.2006
relevant to assessment year 2006-07, incurred book loss of
Rs.8,06,755/-, which was eligible for carry forward to the
succeeding assessment year or years. Likewise for the financial
year 2006-07 relevant to assessment year 2007-08, the petitioner
company incurred expenditure on exploration of Rs.11,58,51,848/-
and, operating expenses of Rs.1,26,808/-. The above aggregate
expenditure of Rs.11,59,78,656/- was debited to the profit and loss
account and, as there was no income, the entire loss incurred was,
therefore, eligible to be carried forward to the succeeding
assessment year or years. In other words, at the beginning of the
financial year 2007-08 relevant to the assessment year 2008-09, the
petitioner company had aggregate brought forward business loss of
Rs.11,67,85,411/-, comprising of business loss of Rs.8,06,755/- for
assessment year 2006-07 and, business loss of Rs.11,59,78,656/- for
assessment year 2007-08.
The
petitioner company had only brought forward business losses, but no
unabsorbed depreciation owing to the peculiar fact that it never
charged any depreciation in the past/current year since neither the
petitioner nor the UJV owned any fixed assets. In fact, whenever
any asset was needed for carrying out the business activities by
the UJV, these were taken on hire basis by the UJV.
As
a part of the corporate restructuring, the petitioner company in
the financial year 2007-08 relevant to assessment year 2008-09,
vide deed of assignment dated 23.3.2007, assigned its participating
interest in the UJV to M/s Cairn India Limited, a group company, at
exploration cost incurred till the effective date of assignment.
According to the petitioner, as a result of the assignment, the
petitioner company was only recouping the accumulated costs
incurred on exploration activities. Up till the date of assignment,
the petitioner company had incurred aggregate expenditure of
Rs.16,17,33,783/- on exploration. The petitioner company on
assignment of its participatory interest in the UJV to M/s Cairn
India Ltd., recouped its entire cost of Rs.16,17,33,783/-,
including the expenditure on exploration incurred in the financial
year 2007-2008 of Rs.4,50,64,691/-. Accordingly, while preparing
the profit and loss account for the financial year 2007-08 relevant
to assessment year 2008-09 in accordance with Part II and III of
Schedule VI to the Companies Act, 1956, the petitioner company
disclosed the above recoupment of exploration cost of
Rs.16,16,49,805/- as income, and further claimed expenditure
incurred during the year of Rs.4,51,81,932/- being the expenditure
on exploration of Rs.4,50,64,693/- incurred during the year and
operating expenses of Rs.1,17,239/-. As a result of the above,
there was net profit as per the profit and loss of
Rs.11,64,67,873/- for the financial year 2007-08 relevant to the
assessment year 2008-09. According to the petitioner, the aforesaid
profit is not income, as the same is nothing but recoupment of
costs incurred on exploration by the petitioner company in the
preceding years. Such costs as incurred in the preceding years had
been debited to the profit and loss account and brought forward as
business loss for the assessment year 2008-09. The above assignment
of participating interest did not result in any taxable income in
the hands of the petitioner company under the normal provisions of
the Act.
However,
despite the fact that the above profit of Rs.11,64,67,873/-
represented the recoupment of exploration cost incurred on
assignment of participating interest, which had been also brought
forward as business loss of Rs.11,65,85,112/-, on strict
construction of statutory provisions contained section 115 JB of
the Act there was a book profit, when as a matter of fact, there
was no income. It is the case of the petitioner that as a result of
assignment of the participatory interest at cost, there is mere
artificial book profit, out of which no dividend under the
Companies Act, 1956 could be declared or can be said to be
available for the purpose of distribution of dividend.
Section
115JB of the Income Tax Act, 1961 (the Act) is a special provision
for payment of tax by certain companies. Under the said provision,
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 the 1st day of April 2007, is less than ten per
cent of its book profit, then notwithstanding anything contained in
any other provision of the Act, 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 the amount of income tax at
the rate of ten percent.
Sub-section
(2) thereof provides that, every assessee, being a company, shall,
for the purpose of the section, 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. The
proviso thereto provides for the manner in which annual accounts are
to be prepared.
Explanation
1 thereto provides that, for the purpose of this section, “book
profit” means the net profit as shown in the profit and loss
account for the relevant previous year prepared under sub-section
(2), as increased by clauses (a) to (f) thereof, if any amount
referred to in clauses (a) to (f) thereof is debited to the profit
and loss account, and as reduced by clause (i) to (vii) there of.
Clause (iii) of the Explanation provides for reduction from the net
profit of the amount of loss brought forward or unabsorbed
depreciation, whichever is less as per books of account. The
explanation to clause (iii) provides that (a) the loss shall not
include depreciation, and (b) the provisions of this clause shall not
apply if the amount of loss brought forward or unabsorbed
depreciation is nil.
According
to the petitioner, on a strict and plain reading of the statutory
provisions contained in section 115JB of the Act, it is evident
that the petitioner company would be taxed on the whole amount of
Rs.11,64,67,873/- which is profit as per the profit and loss
account of the financial year 2007-08 relevant to assessment year
2008-09 since clause (iii) of the Explanation 1 to section 115JB of
the Act read with Explanation (b) thereto, does not enable the
petitioner to set off the brought forward business loss of
Rs.11,65,85,112/-. It is the case of the petitioner that as the
petitioner company had no unabsorbed depreciation in its books of
account, but had only brought forward losses, the set off of
brought forward loss is denied by the Legislature pursuant to the
provisions of clause (iii) of Explanation 1 to section 115 JB of
the Act, when in fact commercially speaking, there is no income for
the assessment year 2008-09. That, under the provisions, as they
have been enacted, it is apparent that, a set off of brought
forward loss can be allowed only where there is unabsorbed
depreciation, in absence thereof, despite the fact that there being
no profit in the real sense, such companies have to suffer the tax
burden, which is against the basic principles of taxation. It is
the case of the petitioner company that there is no income in the
case of the petitioner and as such, the levy of tax under section
115JB of the Act is ultra vires and therefore, unconstitutional.
It
is in the aforesaid factual background that the petitioner has
moved the present petition challenging the provisions of clause
(iii) of Explanation 1 to section 115 JB of the Act, as being ultra
vires the Constitution and seeking a direction against the
respondents No.2 and 3 to allow reduction of brought forward losses
of Rs.11,67,85,411/- of the petitioner company from the net profit
in order to compute the book profit under Minimum Alternate Tax
provisions (115JB of the Act), in the absence of any unabsorbed
depreciation in respect of the assessment year 2008-09.
Heard
Mr. C. S. Agarwal, learned Senior Advocate with Mr. Tushar Hemani,
learned advocate for the petitioner and Mr. M. R. Bhatt, learned
Senior Advocate for the respondents.
Mr.
Agarwal, learned Senior Advocate for the petitioner invited
attention to the provisions of section 115JB of the Act, the
historical background leading to the enactment of the said
provision, as well as the objects and reasons for bringing the
original enacted provision on the statute book. The learned Senior
Advocate also invited attention to the budget speech of the then
Finance Minister of India made in Parliament while introducing the
said section to submit that the intention behind introducing the
said provision was to tax highly profitable companies and no more.
It
was submitted that clause (iii) of Explanation 1 to section 115JB
of the Act read with clause (b) of the Explanation thereto are
contrary to the purpose of the enactment of section 115JB of the
Act, which provides for levy of Minimum Alternative Tax. It was
further submitted that, the said provision was introduced to tax
such companies which were having large profits and, were
distributing dividends, without paying any tax, by claiming various
deductions provided in the Act like depreciation, investment
allowance and, other deductions as are contained in Chapter VIA of
the Act. Hence, the intention of the legislature was to tax
companies with large profits and not companies who did not have any
profit. According to the learned counsel the provisions contained
in clause (iii) of Explanation 1 to section 115JB of the Act are
which provide for reduction from book profit (computed as per the
Explanation below the main section) of loss brought forward or
unabsorbed depreciation, which ever is less, and further, in case
either of the two is absent no reduction is allowable, despite the
fact that no depreciation is provided or can be provided and in
fact, even not debited. In the circumstances, the said provision is
discriminatory inasmuch as the same provides for distinction
between an assessee who has taken plant and machinery on hire and,
therefore has only unabsorbed business loss, and an assessee who
has invested in acquisition of plant and machinery and therefore,
has both unabsorbed business losses and unabsorbed depreciation.
The provision also discriminates against companies that have
incurred substantial expenditure on the capital assets eligible for
depreciation under section 32(1) of the Act and, consequently, has
huge unabsorbed depreciation but has no cash loss. Likewise, the
provision discriminates against companies which have huge cash loss
but little depreciation or no depreciation, since the business of
the company may not be capital intensive, like service industry or
a business where all expenditure including expenditure incurred on
capital assets have been booked as revenue expenditure like
business of oil exploration.
It
was further submitted that Article 14 forbids class legislation but
does not forbid reasonable classification. Reasonable
classification must satisfy the two conditions, namely, (a) the
classification must be founded on an intelligible differentia which
distinguishes persons or things that are grouped together from
other left out of the group, and (b) the differentia must have a
rationale to the object sought to be achieved by the statute.
According to the learned counsel, the provisions of clause (iii) of
the Explanation to section 115JB are violative of Article 14 of the
Constitution because by not allowing a reduction of loss, the
legislature has not made a reasonable classification since
assessees who may not be owing any asset are required to pay tax
despite the fact that there is no income, which has no nexus to the
object sought to be achieved by the legislation, that is, to tax
dividend paying companies. In support of his submissions, the
learned Senior Advocate for the petitioner has placed reliance upon
the following decisions :
Peerless
General Finance and Investment Co. Ltd. v. Union of India,
(1987) 1 SCC 424,
S.C.
Prashar and Another v. Vasantsen Dwarkadas and others, (1963)
49 ITR 1 (SC),
D.S.
Nakara v. Union of India, [1983] 1 SCC 305.
Maneka
Gandhi v. Union of India, [1978] 1 SCC 248.
S.K.
Datta, ITO v. Lawrence Singh Ingty, 68 ITR 272 (SC).
Star
Television News Ltd. v. Union of India, 317 ITR 76 (Bom).
Next
it was urged that there is no rationale or valid basis to restrict
the relief to unabsorbed depreciation or business loss, which ever
is lower, particularly when the purpose of clause (iii) to the
Explanation is to provide relief of losses of earlier years and not
to deny relief of setting off of loss or unabsorbed depreciation,
which ever is lower, even when there is no income to the petitioner
company. It was reiterated that the intelligible differentia is
absent in the provision denying the relief in a case where the
amount of ‘loss brought forward’ or ‘unabsorbed
depreciation’ is nil. According to the learned counsel, there
may be service industries or trading concerns which may not have
ownership of depreciable assets; thereby incurring no depreciation
cost in their books. Unabsorbed depreciation in such cases would
only be impossibility; but they may have normal business losses.
Such companies may have the same quantum of loss (with nil
depreciation) as other companies (with depreciation), but could be
denied the setoff only due to operation of the explanation to
clause (iii) of the Explanation to section 115JB of the Act. Thus,
the provision creates discrimination between companies having the
same quantum of losses.
Referring
to the decision of the Supreme Court in the case of Garden
Silk Weaving Factory Pvt. Ltd. v. CIT, 189 ITR 512, it was
submitted that there is no distinction between unabsorbed
depreciation and brought forward losses in the commercial sense,
hence while computing the commercial book profit, the distinction
vide clause (iii) of the Explanation to section 115JB is unfair and
discriminatory.
It
was further submitted that the tax levied goes beyond the intention
of legislature, while enacting section 115J and section 115JA/115JB
of the Act. In support of his submissions, the learned counsel
placed reliance upon the decisions of the Supreme Court in the case
of Surana Steels (P) Ltd. v. Commissioner of Income Tax,
237 ITR 777 (SC), and in the case of Apollo Tyres Ltd. v.
Commissioner of Income Tax, 255 ITR 273 (SC), as well as
the decision of the Bombay High Court in the case of Commissioner
of Income Tax v. Ajanta Pharma Ltd., 318 ITR 252 (Bombay).
It was further submitted that no reason emanates from the Finance
Bill explaining the amendment and, therefore, the same is
unconstitutional, as has been held in the case of Exide
Industries Ltd., 292 ITR 470. Reliance was also placed upon
the decision of the apex court in the case of Tata Motors
Ltd. v. State of Maharashtra, AIR 2004 SC 3618 as well as
the decision of the Madras High Court in the case of K. Jaya
Prakash v. The Executive Authority, AIR 1982 Madras 272.
The
next submission advanced on behalf of the petitioner was that where
the plain literal interpretation of a statutory provision produces
a discriminatory or incongruous or manifestly absurd or unjust
result which could never have been intended by the Legislature, the
Court may modify the language used by the Legislature or even “do
some violence” to it, so as to achieve the obvious intention
of the Legislature and produce a rational construction. It was
submitted that it could never have been the intention of the
Legislature to tax an assessee without being in receipt of any
income. It was submitted that if the provisions of clause (iii) of
Explanation 1 to section 115 JB of the Act are required to operate,
the same would result into manifestly absurd or unjust result
inasmuch as the assessee despite having no income, would be
assessed to income merely for the reason that the assessee does not
have any asset so as to claim depreciation. In support of his
submissions, the learned counsel placed reliance upon the following
decisions :
[a] K.P.Varghese
v. I.T.O., [1981] 131 ITR 597 (SC).
[b] C.W.S.
(India) Ltd. v. CIT, [1994] 208 ITR 649 (SC).
[c] Calcutta
Gujarati Education Society v. Calcutta Municipal Corporation,
[2003] 10 SCC 533.
[d] Commissioner
of Income Tax v. J.H. Gotla, 156 ITR 323 (SC).
[e] Commissioner
of Income Tax v. Hindustan Bulk Carriers, 259
ITR 449 (SC).
[f]
Commissioner of Income-tax v. Ajanta Pharma Ltd., 318
ITR 252 (Bom.)
It
was further submitted that in the case of the petitioner, there are
no profits, yet, on a strict construction of statutory provisions
there are taxable profits, which is an absurdity and, therefore,
not in accordance with the scheme and object of the Act. It was
submitted that, in fact, as a result of assignment of the
participatory interest at cost, there is mere artificial book
profit, out of which no dividend under the Companies Act, 1956
could be declared nor was the said book profit available for the
purpose of distribution of dividend. In the circumstances, having
regard to the object of the enactment, section 115JB of the Act, to
the extent it provides for levy of Minimum Alternative Tax without
providing any safeguard, results into absurdity and is an arbitrary
provision since a provision cannot require a tax payer to pay tax
when really there is no profit, much less a book profit or income.
It
was pointed out that in the light of the provisions of clause (iii)
of the Explanation below section 115JB of the Act, if a company has
no depreciable assets, no deduction can be allowed despite the fact
that, there are huge carried forward losses. If a business of a
company is not carried through or is based on capital intensive
infrastructure, it will not be entitled to set off of loss
suffered; whereas if it is based on capital asset oriented
infrastructure, it would be entitled to set off, may be to the
extent of depreciation allowable or brought forward loss, which
every is lower. In the circumstances, the said provision is
arbitrary inasmuch as the same treats the two assessees
differently, which was not the object behind the enactment. It was
contended that the right to freedom guaranteed under Article
19(1)(g) of the Constitution is also violated, as the impugned
provision does not provide the right to practice trade or business
by providing level playing field and denies a citizen who may
suffer a loss to set off the same after carrying forward the same
unless he has both a carried forward loss as well as a carried
forward unabsorbed depreciation. If either of them is absent, he is
denied the set off by disregarding the fact that such a citizen may
not have any depreciable asset and, carries the same business
without a depreciable asset. Thus, by denying such a citizen the
right to set off loss also violates Article 19(1)(g) of the
Constitution of India. In support of his submissions the learned
counsel placed reliance upon the following decisions:
[a] The
decision of the apex court in the case of State of Kerala v.
Haji K. Haji Kutty Naha, AIR 1969 SC 378, was cited for the
proposition that the validity of a taxing statute is open to attack
on the ground that it infringes fundamental rights.
[b] The
decision of the apex court in the case of Khandige Sham Bhatt
v. Agricultural ITO, [1963] 48 ITR 21 (SC), was cited for the
proposition that a State cannot make any law which takes away or
abridges the equality clause contained in Article 14 of the
Constitution which enjoins a State not to deny to any person equality
before law or equal protection of law.
Next,
it was submitted that no reason emanates from the Finance Bill
explaining the amendment and, as such, the provision is
unconstitutional. It was submitted that neither the objects and
reasons nor does the affidavit in reply specify the intention
behind introducing such a provision and as such, in absence of
proper reasons being assigned for introducing the impugned
provision, the same is unconstitutional and requires to be struck
down.
In
conclusion, it was submitted that the provisions of clause (iii) of
Explanation 1 to section 115 JB of the Act are arbitrary,
discriminatory and violative of petitioner’s fundamental right
under Articles 14 and 19(1) (g) of the Constitution and as such,
ultra vires the Constitution and liable to be struck down. It was
submitted that, in the alternative, if the Court is not inclined to
strike down the said provision as being unconstitutional, the
provision may be read down so as to achieve the obvious intention
of the Legislature and produce a rational construction.
Mr.
M. R. Bhatt learned Senior Advocate appearing on behalf of the
respondents vehemently opposed the petition. It was submitted that
Article 265 of the Constitution read with Entry 82 of the Union List
contained in the Seventh Schedule to the Constitution empower the
Union Government to levy tax on income other than agricultural
income and it is by virtue of this provision and as a measure of
equity in taxation that Minimum Alternate Tax (MAT) is levied under
section 115JB of the Act on companies having book profits under the
Companies Act. Such companies are required to prepare their profit
and loss account in accordance with Part II and Part III of Schedule
VI to the Companies Act and are liable to pay MAT on the “book
profit” being the net profit shown in the profit and loss
account as adjusted according to the provisions of Explanation 1 of
section 115JB of the Act. Thus, MAT is essentially a tax on income
and its levy is well within the legislative competence of the Union
Government.
It
was submitted that in the amended clause (iii), two limbs “(a)”
and “(b)” have been provided in the Explanation to
clause (iii). While limb “(a)” which states that “the
loss shall not include depreciation” already existed in the
pre-amended provision, limb “(b)” was newly inserted
providing that “the provisions of this clause shall not apply
if the amount of loss brought forward or unabsorbed depreciation is
Nil”. Vide CBDT’s Circular No.8 of 2002 dated 27.8.2002, it
was also duly explained that the amendment in clause (iii) of the
Explanation to section 115JB, clarifies that where the value of the
amount of either loss brought forward or unabsorbed depreciation is
“Nil”, no amount on account of such loss brought
forward or unabsorbed depreciation would be reduced from the book
profit. It was contended that while the language of the provisions
of clause (iii) of Explanation 1 to section 115 JB of the Act is by
itself quite clear and unambiguous, the explanatory circular makes
the application of the provisions absolutely clear. It was
submitted that there was nothing unfair or discriminatory about the
provisions of clause (iii) of Explanation 1 to section 115 JB of
the Act and that, it is a well laid down judicial principle that
having regard to the wide variety of diverse economic criteria that
go into the formulation of fiscal policy, the legislature enjoys a
wide latitude in the matter of selection of persons, subject
matters, events etc. for taxation. The MAT provisions have
basically been introduced as a measure of equity in taxation. The
legislature does not have to tax everything in order to be able to
tax something. If there is equality and uniformity within each
group, the law would not be discriminatory. It was submitted that,
in the facts of the present case, within each group, there is
equality and uniformity insofar as the applicability of the
impugned provision is concerned and as such, the same cannot be
termed to be discriminatory.
Placing
reliance upon a decision of the Supreme Court in the case of Jaipur
Hosiery Mills (P) Ltd. v. State of Rajasthan, (1970) 26 STC
341, it was submitted that the statute is not open to attack on the
mere ground that it taxes some persons or objects and not others,
it is only when within the range of its selection, the law operates
unequally and cannot be justified on the basis of a valid
classification that there would be a violation of Article 14 of the
Constitution. Referring to the decision of the Supreme Court in the
case of State of A.P. v. McDowell and Co., (1996) 3
SCC 709, it was submitted that no enactment can be struck down on
the ground that it is unreasonable or arbitrary and that,
therefore, the petition deserves to be dismissed on this ground
alone.
In
rejoinder, the learned counsel for the petitioner submitted that the
decision in the case of State of A.P. v. McDowell and Co.,
(supra) has no relevance to the issue involved in the present writ
petition. It was contended that the Supreme Court, in the said case,
has not held that an enactment cannot be struck down on the ground
that it is arbitrary or unreasonable. It has held that Article 14
cannot be pressed into service merely on the allegation that the
statutory provision was arbitrary or unreasonable, and that some
constitutional infirmity has to be shown for striking down the
legislation which, in the instant case, the petitioner, is
contending. According to the learned counsel, the precise
submission of the petitioner is that there is constitutional
infirmity inasmuch as the provisions enacted are contrary to the
intent and purpose of enactment of section 115JB of the Act and go
beyond the scope and purpose of the said provisions and in fact,
when read in context of object of enactment lead to absurd results
and this deserves to be either struck down or must necessarily be
read down. It was urged that it is more than evident that in the
present case where the assessee who has not earned any income and
has merely recouped the expenditure incurred in the preceding year
is being held liable to pay tax, merely because in the preceding
year expenditure had been incurred which had resulted into book loss
and in the succeeding year, when there is such recoupment of
expenditure, the same is to be treated to be a book profit so as to
levy the Minimum Alternate Tax which is absolutely beyond the object
and purpose of the enactment.
The
principal and only challenge in the present petition is to the
constitutional validity of clause (iii) of Explanation 1 of section
115JB of the Act on the ground that the same is discriminatory and
arbitrary inasmuch as while computing the book profit the same
provides for reduction from the net profit of loss brought forward
or unabsorbed depreciation whichever is less, which means that if
either of the two are absent the assessee would not be entitled to
reduction in the book profit. Thus, the provision has been
challenged as being discriminatory towards those assessees like the
petitioner, who do not have capital asset based infrastructure and
as such would not have any unabsorbed depreciation. Thus, despite
having substantial brought forward loss, the petitioner in the light
of the provisions of clause (iii) of the Explanation to section
115JB of the Act is still liable to pay tax on the book profit
without the same being reduced by the amount of brought forward
loss.
[7.1] It
is in the background of the aforesaid facts that the petitioner has
challenged the constitutional validity of the provisions of clause
(iii) of the Explanation to section 115 JB of the Act. Before
adverting to the facts of the case as well as to the contentions
advanced on behalf of the respective parties, it may be pertinent to
take note of the legislative history as well as the relevant
statutory provisions.
[7.2] A
new Chapter XII-B, containing section 115J, came to be inserted by
the Finance Act, 1987, with effect from 1st April, 1988.
The new section made provision for levy of minimum tax on book
profits of certain companies. Referring to the proposed section
115J, the Minister for Finance in the Budget Speech (Finance Bill,
1987), explained the rationale behind its introduction in the
following words:
“80.
It is only fair and proper that the prosperous should pay at least
some tax. The phenomenon of so-called `zero-tax’ highly profitable
companies deserves attention. In 1983, a new section 80VVA was
inserted in the Act so that all profitable companies pay some tax.
This does not seem to have helped and is being withdrawn. I now
propose to introduce a provision whereby every company will have to
pay a `minimum corporate tax’ on the profits declared by it in its
own accounts. Under this new provision, a company will pay tax on at
least 30 per cent of its book profit. In other words, a domestic
widely held company will pay tax of at least 15 per cent of its book
profit. This measure will yield a revenue gain of approximately
Rs.75 crores.”
[7.3] In
the Memorandum explaining provisions in Finance Bill, 1987 in
relation to “New provisions to levy minimum tax on “Book
profits” of certain companies”, it has been stated
thus:
“Under
the existing provisions of the Income Tax Act, certain deductions are
allowed in the computation of profits and gains of business or
profession. Various deductions are also allowed under Chapter VI-A of
the Income Tax Act in computing total income. As a result of these
concessions, certain companies making huge profits, are managing
their affairs in such a way as to avoid payment of income-tax.
With
a view to making the tax system more progressive, a new Chapter XIIB
is proposed to be inserted in the Income Tax Act.
Under
the proposed amendment, in the case of any company whose total income
as computed under the other provisions of the Income Tax Act in
respect of any previous year is less than 30 per cent of its book
profit, the total income of such taxpayer chargeable to tax shall be
deemed to be the amount equal to 30 per cent of such book profit.
For
the purposes of the aforesaid provisions, “book profit”
means the net profit as shown in the profit and loss account in the
relevant previous year prepared in accordance with the provisions of
Parts II and III of the Sixth Schedule to the Companies Act, 1956,
subject to adjustments in respect of any amount of income tax paid or
payable, any amount carried to any reserve set aside to meet any
provision, or provision for loss of subsidiary companies or any
amount set apart for declaration of dividends which are taken into
the profit and loss account prepared in accordance with the Sixth
Schedule as above.
However,
the expenditure relating to income as well as the receipts relating
to incomes to which the provisions of Chapter III of the Income Tax
Act apply, will be excluded from the computation of the “book
profit”. Thirty per cent of such “book profit”
shall be treated as total income of the company to which the
provisions of this new Chapter (section 115J) apply. It has also been
provided that the aforesaid provisions shall not affect determination
of the amount to be carried forward to the subsequent years under the
provisions of section 32(2), 32A(3), 72, 73, 74, 74A and 80J relating
to unabsorbed depreciation, unabsorbed investment allowance,
unabsorbed loss and unabsorbed deduction relating to tax holiday.
As
a consequential amendment, Chapter VIB of the Income Tax Act relating
to restriction on certain deductions in the case of companies, is
proposed to be omitted.
These
amendments will take effect from 1st April
1988 and will, accordingly, apply in relation to the assessment year
1988-89 and subsequent years.”
[7.4] The
scope and effect of the provisions of section 115J had been
elaborated in the departmental circular No.495 dated 22nd
September, 1987. The portion of the said circular insofar as the
same is relevant for the present purpose reads as under:
“[36.3] Section
115J, therefore, involves two processes. Firstly, an assessing
authority has to determine the income of the company under the
provisions of the Income Tax Act. Secondly, the book profit is to be
worked out in accordance with the Explanation to section 115J(1) and
it is to be seen whether the income determined under the first
process is less than 30 per cent of the book profit. Section 115J
would be invoked if the income determined under the first process is
less than 30 per cent of the book profit. The Explanation to
sub-section (1) of section 115J gives the definition of the “book
profit” by incorporating the requirement of section 205 of the
Companies Act in the computation of the book profit. Brought forward
losses or unabsorbed depreciation whichever is less would be reduced
in arriving at the book profits. Sub-section (2), however, provides
that the application of this provision would not affect the carry
forward of unabsorbed depreciation, unabsorbed investment allowance,
business losses to the extent not set off, and deduction under
section 80J, to the extent not set off as computed under the Income
Tax Act.”
[7.5] The
present petition relates to Section 115JB of the Act, which came to
be inserted by Finance Act, 2000 with effect from 1.4.2000, and
insofar as the same is relevant for the present purpose reads thus:
115-JB.
Special provision for payment of tax by certain companies.–(1)
Notwithstanding anything contained in any other provision of this
Act, where in the case of an assessee, being a company, the income
tax, payable on the total income as computed under this Act in
respect of any previous year relevant to the assessment year
commencing on or after the 1st day of April, 2007, is less than ten
per cent of its 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 the amount of income tax at the rate of
ten per cent.
(2)
Every assessee, being a company, shall, for the purposes of this
section, 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:
Provided
that while preparing the annual accounts including profit and loss
account,–
(i) the
accounting policies;
(ii) the
accounting standards adopted for preparing such accounts including
profit and loss account;
(iii) the
method and rates adopted for calculating the depreciation,
shall
be the same as have been adopted for the purpose of preparing such
accounts including profit and loss account and laid before the
company at its annual general meeting in accordance with the
provisions of Section 210 of the Companies Act, 1956:
Provided
further that where the company has adopted or adopts the
financial year under the Companies Act, 1956, which is different from
the previous year under this Act,–
(i) the
accounting policies;
(ii) the
accounting standards adopted for preparing such accounts including
profit and loss account;
(iii) the
method and rates adopted for calculating the depreciation,
shall
correspond to the accounting policies, accounting standards and the
method and rates for calculating the depreciation which have been
adopted for preparing such accounts including profit and loss account
for such financial year or part of such financial year falling within
the relevant previous year.
Explanation-1.–For
the purposes of this section, ‘book profit’ means the net
profit as shown in the profit and loss account for the relevant
previous year prepared under sub-section (2), as increased by–
(a)xxxx
to (h)xxxx
if
any amount referred to in clauses (a) to (h) is debited to the profit
and loss account, and as reduced by
xxxx
(iii) the
amount of loss brought forward or unabsorbed depreciation, whichever
is less as per books of account.
Explanation.–For
the purposes of this clause,–
(a) the
loss shall not include depreciation;
(b) the
provisions of this clause shall not apply if the amount of loss
brought forward or unabsorbed depreciation, is nil; or
Explanation.–For
the purposes of this clause, the loss shall not include depreciation;
or
xxxxx
[7.6] Chapter
XII-B came to be inserted in the Income Tax Act by the Finance Act,
1987 with effect from 1.4.1987. Under the provisions of the Income
Tax Act, certain deductions are allowed in the computation of
profits and gains of business or profession. Various other
deductions are also allowed under Chapter VI-A of the Act in
computing total income. As a result of these concessions, certain
companies making huge profits were managing their affairs in such a
way as to avoid payment of income-tax. In 1983, a new section 80VVA
was inserted in the Act so that all profitable companies pay some
tax, but the same does not appear to have helped. Hence, the same
was withdrawn and Chapter XII-B came to be inserted introducing
section 115J of the Act, a provision whereby every company would
have to pay “minimum corporate tax” on the profits
declared by it in its own accounts. As the number of zero tax
companies and companies paying marginal tax had grown, Minimum
Alternate Tax was levied from assessment year 1997-98 by virtue of
the provisions of section 115JA which came to be inserted by the
Finance Act, 1996 with effect from 1.4.1997. However, the efficacy
of the said provisions had declined in view of the exclusions of
various sectors from the operation of MAT and the credit system. It
had also led to legal complications. Hence, in its place section
115JB came to be inserted by the Finance Act, 2000, with effect
from 1.4.2001, which is simpler in application. The provisions of
section 115JB as originally inserted provided that all companies
having book profit under the Companies Act, prepared in accordance
with Part-II and Part-III of Schedule-VI to the Companies Act,
shall be liable to pay a minimum alternate tax at a lower rate of
7.5%, as against the then existing effective rate of 10.5% of the
book profits. These provisions were made applicable to all
corporate entities without any exception.
[7.7] Thus,
section 115JB of the Act provides for a Minimum Alternate Tax (MAT)
on companies. Under the provisions of this section, as applicable
to the assessment year under consideration a company is required to
pay at least 10% of its book profit as tax. In case the tax
liability of a company under the regular provisions is more than
this amount, the provisions of MAT will not apply and the company
shall pay regular tax as per the regular scheme. Under the
provisions of section 115JB of the Act, a deeming fiction has been
introduced whereby in case where the tax payable by a company is
less than 10% of its book profit, such book profit is deemed to be
the total income of the assessee and the tax payable by the
assessee on such income is the amount of income tax at the rate of
10%. Sub-section (2) of section 115JB of the Act provides for the
manner in which the profit and loss account has to be prepared. The
Explanation to section 115JB defines “book profit” to
mean the net profit as shown in the profit and loss account for the
relevant previous year prepared under sub-section (2), as increased
by clauses (a) to (g) thereunder. If any amount referred to in
clauses (a) to (f) is debited to the profit and loss account, and
as reduced by clauses (i) to (vii) thereunder. Clause (iii) of the
Explanation to section 115JB of the Act provides for reducing the
net profit as shown in the profit and loss account by the amount of
loss brought forward or unabsorbed depreciation, whichever is less,
as per the books of account. The explanation to clause (iii), inter
alia, provides that the provisions of the said clause would not be
applicable if the amount of loss brought forward or unabsorbed
depreciation is `Nil’. In the circumstances, in the absence of
either brought forward loss, or unabsorbed depreciation, an
assessee would not be entitled to compute the book profit by
reducing the net profit by the amount of brought forward loss or
unabsorbed depreciation, as the case may be. Section 115JB of the
Act opens with a non-obstante clause. From the scheme of the
section as noted hereinabove, it is apparent that section 115JB is
a self contained Code and will apply notwithstanding any of the
provisions of the Act.
[7.8] In
the facts of the present case, the petitioner does not have any
unabsorbed depreciation as per its books of account and as such
while computing its book profit, it is not entitled to the benefit
of reduction of the net profit under clause (iii) of the
Explanation to section 115JB. The petitioner has therefore,
challenged the constitutional validity of the said provision
contending that the policy behind the enactment is to tax zero-tax
paying prosperous companies, whereas as a result of the operation
of the impugned provision, which does not permit reduction of the
net profit by brought forward loss in the absence of unabsorbed
depreciation while computing the book profit, even a company like
the petitioner who has no actual income in the year under
consideration, is liable to pay tax at the specified rate on its
book profit. According to the petitioner, the impugned provision
insofar as the same provides for reduction of the book profit in
case of companies having both brought forward loss and unabsorbed
depreciation to the extent of the lesser of the two, is violative
of Article 14 of the Constitution of India vis-à-vis those
companies who have either only brought forward loss or unabsorbed
depreciation. It is accordingly contended that the classification
made by the legislature by virtue of the impugned provision which
seeks to classify companies on the basis as to whether they have
both carried forward loss as well as unabsorbed depreciation in
their books of account or only either of the two, has no nexus to
the object sought to be achieved, viz., to tax prosperous
companies.
[7.9] In
this regard it may be germane to refer to the decision of a
Constitution Bench of the Supreme Court in S.K. Dutta, ITO
v. Lawarence Singh Ingty, (1968) 68 ITR 271,
wherein it was held thus:
“It
is not in dispute that taxation laws must also pass the test of
Article 14. That has been laid down by this Court in Moopil
Nair v. State of Kerala, [1961] 3 S.C.R. 77. But
as observed by this Court in East India Tobacco Co. v.
State of Andhra Pradesh, [1963] 1 S.C.R. 404, 409, in
deciding whether the taxation law is discriminatory or not, it is
necessary to bear in mind that the State has a wide discretion in
selecting persons or objects it will tax, and that a statute is not
open to attack on the ground that it taxes some person or objects and
not others; it is only when within the range of its selection, the
law operates unequally, and that cannot be justified on the basis of
any valid classification, that it would be violative of Article 14.
It is well settled that a State does not have to tax everything in
order to tax something. It is allowed to pick and choose districts,
objects, persons, methods and even rates for taxation if it does so
reasonably.”
[7.10] If
one examines the impugned provision in the light of the principles
enunciated in the aforesaid decision, it is apparent that all
assessees falling within the ambit of section 115JB of the Act are
special class of assessees, viz. those companies in whose case the
income tax payable upon determining their total income under the
provisions of the Income Tax Act is less than 10% of their book
profit. While examining the constitutional validity of the impugned
provision, what has to be seen is whether, within the class, there
is any discrimination. On a plain reading of clause (iii) of the
Explanation to section 115JB of the Act, it is apparent that the
same applies uniformly and equally to all companies falling within
the ambit of section 115JB, without any discrimination. The
provision does not create any class within the class of assessees
falling within the ambit of section 115JB. The fact that in a given
case an assessee may not have any unabsorbed depreciation or any
brought forward loss in its books of account, as a consequence of
which the assessee would not be entitled to reduction of the book
profit under the impugned provision, is a mere fortuitous
circumstance. The legislature, while enacting a provision is not
required to meet with or envisage every fortuitous circumstance
that may arise while implementing such provision. Merely because in
a given circumstance, the provision may act to the disadvantage of
a particular assessee would not render the provision arbitrary, nor
can it be said that the same violates the equality clause.
[7.11] In
Government of A.P. v. Laxmi Devi, (2008) 4 SCC 720,
the Supreme Court has analyzed and explained the power of judicial
review of statutes. It has been held in the said decision that
while the court has the power to declare a statute to be
unconstitutional, it should exercise great restraint in this
connection. In the opinion of the Court, there is one and only one
ground for declaring an Act of the legislature (or a provision in
the Act) to be invalid, and that is if it clearly violates some
provision of the Constitution in so evident a manner as to leave no
manner of doubt. It was further held that as regards fiscal or tax
measures greater latitude is given to such statutes than to other
statutes. All decisions in the economic and social spheres are
essentially ad-hoc and experimental. Since economic matters are
extremely complicated, this inevitably entails special treatment
for special situations. The State must, therefore, be left with
wide latitude in devising ways and means of fiscal or regulatory
measures, and the court should not, unless compelled by the statute
or by the Constitution, encroach into this field, or invalidate
such law. As regards economic and other regulatory legislation,
judicial restraint must be observed by the court and greater
latitude must be given to the legislature while adjudging the
constitutionality of the statute because the court does not consist
of economic or administrative experts.
[7.12] The
Court in the said decision was dealing with the provisions of the
Stamp Act, 1899 (as in A.P.), and held that it is well settled that
stamp duty is a tax, and hardship is not relevant in construing
taxing statutes which are to be construed strictly. That there is
no equity in a tax. If the words used in a taxing statute are
clear, one cannot try to find out the intention and the object of
the statute. The Court held that, the High Court, therefore, fell
in error in trying to go by the supposed object and intendment of
the Stamp Act, and by seeking to find out the hardship which will
be caused to a party by the impugned amendment of 1998.
[7.13] In
the case of State of A.P. v. Nallamilli Ramli Reddi,
(2001) 7 SCC 708, the Supreme Court held, what Article 14 of the
Constitution prohibits is “class legislation” and not
“classification for purpose of legislation”. If the
legislature reasonably classifies persons for legislative purposes
so as to bring them under a well-defined class, it is not open to
challenge on the ground of denial of equal treatment that the law
does not apply to other persons. The test of permissible
classification is twofold: (i) that the classification must be
founded on intelligible differentia which distinguishes persons
grouped together from others who are left out of the group, and
(ii) that differentia must have a rational connection with the
object sought to be achieved. Article 14 does not insist upon
classification, which is scientifically perfect or logically
complete. A classification would be justified unless it is patently
arbitrary. If there is equality and uniformity in each group, the
law will not become discriminatory, though due to some fortuitous
circumstance arising out of peculiar situation some included in a
class get an advantage over others so long as they are not singled
out for special treatment.
[7.14] In
the case of D. C. Bhatia v. Union of India, (1995) 1
SCC 104, the Supreme Court held that if there is some nexus between
the object sought to be achieved and the classification, the
legislature is presumed to have acted in proper exercise of its
constitutional power. The classification in practice may result in
some hardship. But, a statutory discrimination cannot be set aside,
if there are facts on the basis of which this statutory
discrimination can be justified. The Court can only consider
whether the classification has been done on an understandable basis
having regard to the object of the statute. The Court will not
question its validity on the ground of lack of legislative wisdom.
The classification cannot be done with mathematical precision. The
Court cannot act as a super-legislature.
[7.15] In
the facts of the present case, as noted hereinabove, the principal
grievance ventilated is that the petitioner is put to undue
hardship inasmuch as clause (iii) of the explanation to section
115JB of the Act does not permit reduction of book profit to the
extent of brought forward loss, in case where a company does not
have any unabsorbed depreciation as per its books of account. The
constitutional validity of the said provision is also challenged on
the ground of absurdity on the ground that though the petitioner
does not have any income in the year under consideration, merely
because the petitioner has shown book profit under the Companies
Act, 1956, the petitioner becomes liable to pay tax under the
provisions of section 115JB of the Act, without being in a position
to set off the brought forward losses of the earlier years, which
is absurd as the petitioner does not have any income in the year
under consideration.
[7.16] The
Income Tax Act, 1961 is indubitably a fiscal statute. The
legislature has over the years been devising ways and means to
prevent companies from avoiding total payment of income-tax by
resorting to the various deductions and allowances made under the
Act. In its attempt to bring all companies under the tax net, the
legislature has formulated a scheme as contained under section
115JB of the Act with a view to ensure that all companies pay at
least some tax. The provision also provides for the manner of
computation of income thereunder, which is a special provision for
certain companies. Section 115JB of the Act including clause (iii)
of the Explanation thereto, which is impugned in the present
petition applies uniformly to all companies. The said provision
does not draw any distinction between companies as a class and
applies to all companies which fall within its ambit; viz.
companies in whose case the income tax payable on the total income
as computed under the normal provisions of the Act in respect of
the previous year relevant to the assessment year is less than 10%
of their book profits. The provision does not intend to make any
classification between a capital asset infrastructure company and a
capital intensive company with no capital assets. If, as a
consequence of implementing the provisions of the section, some
companies are put to some hardship, it does not mean that the
legislature has created a distinct class of companies. As held by
the Apex Court in State of A.P. v. Nallamilli Ramli Reddi
(supra), a classification would be justified unless it is
patently arbitrary. If there is equality and uniformity in each
group, the law will not become discriminatory; though due to some
fortuitous circumstance arising out of peculiar situation some
included in a class get an advantage over others so long as they
are not singled out for special treatment.
[7.17] Under
the Scheme of the Act, an assessee is entitled to carry forward its
losses as well as unabsorbed depreciation and set off of the same
in its regular assessment. It is only if after determining the
total income of the company under the normal provisions, the income
tax payable is less than 10% of its book profit that the income of
such company is to be computed under section 115JB of the Act and
the company becomes liable to pay tax at the rate of 10% of its
book profit as computed under the provisions of section 115JB. The
computation includes reduction of the book profit under clause
(iii) of the Explanation to section 115JB of the Act. Thus, it is
not as if the assessee company is deprived of any right by virtue
of the provisions of section 115JB of the Act.
[7.18] In
the case of the petitioner company, the petitioner itself had
debited the expenditure incurred by it to the profit and loss
account and thereafter, had assigned its participating interest in
the UJV to M/s Cairn India Ltd. before it actually started making
any profit in relation to the business and as such, was not in a
position to set off its losses against the income earned by it. In
the year under consideration, it is an admitted position, that the
petitioner had a book profit of Rs.11,64,67,873/- as per its books
of account as maintained in accordance with provisions of the
Companies Act, 1956 and as such, became liable to pay income tax in
respect thereof under section 115JB of the Act. It is also not as
if the petitioner was not permitted to set off its brought forward
losses against its income. In fact it is only after computing the
income under the provisions of the Income Tax Act after allowing
all allowable deductions, because the income tax payable works out
to less than ten per cent of book profits that the petitioner has
become liable to be assessed under provisions of section 115JB of
the Act on its book profits. Thus, merely because, in the peculiar
facts and circumstances of the case of the petitioner, the
petitioner has not been able to set off its losses against its
income while computing its income under section 115JB of the Act,
the same would not render the statutory provisions unconstitutional
or invalid. In the circumstances, the challenge to the provisions
of section 115JB of the Act must necessarily fail.
[7.19] Though
not specifically pleaded in the petition, at the time of hearing of
the petition it had been urged that in case where the plain literal
interpretation produces an absurd or manifestly unjust result which
could never have been intended by the Legislature, the Court may
fine tune the language used by the Legislature and produce a
rational result. It was submitted that since the plain and literal
interpretation produces an absurd and unjust result inasmuch as the
petitioner who has no income is required to pay tax, the provision
is required to be read down by the Court.
[7.20] Insofar
the prayer that the provisions may be read down is concerned, it is
well settled that the Doctrine of Reading Down is an internal aid
to construe the words or phrase in a statute to give it a
reasonable meaning. The object of reading down is to keep the
operation of the statute within the purpose of the Act and
constitutionally valid. Thus, in order to save a statute or a part
thereof from being struck down it can be suitably read down.
However, reading down is not permissible in such a manner as would
fly in the face of the express terms of the statutory provisions.
It is a very well settled legal position, that if the Court while
construing a provision, finds that the same is ambiguous, the Court
instead of striking it down, may read it down so as to save the
constitutional validity. Moreover, the rule of reading down applies
only where two views are possible as to the meaning of the
statutory language. (See Delhi Transport Corporation v.
D.T.C. Mazdoor Congress, 1991 Supp (1) SCC 600, C.B.
Gautam v. Union of India , (1993) 1 SCC 78,
and Rapti Commission Agency v. State of U.P., (2006)
6 SCC 522).
[7.21] In
the present case, the Court does not find the impugned provision to
be in any manner unconstitutional, hence, the question of reading
it down to save its constitutional validity does not arise.
Besides, the provisions of clause (iii) of the Explanation to
section 115JB are clear and ambiguous and it is not possible to
take two views as to the meaning of the statutory language. Hence,
the request to read down the provision also does not merit
acceptance. Consequently, the question of directing the respondents
to allow reduction of the brought forward losses of
Rs.11,67,85,411/- of the petitioner company from the net profit in
order to compute book profits under section 115JB of the Act in
absence of any unabsorbed depreciation in the assessment year under
consideration, also cannot be accepted.
For
the foregoing reasons, the Court does not find any merit in the
petition. The petition, therefore, fails and is accordingly,
rejected. Notice is discharged. No order as to costs.
[D.A.MEHTA,
J.]
[HARSHA
DEVANI, J.]
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