JUDGMENT
Rakesh Kumar Garg, J.
1. The Tribunal Delhi Bench (D) vide its Order dated 21-2-1997 has referred the following question of law to this Court for its opinion:
Whether the Tribunal is correct in law in upholding the order of the learned Commissioner passed under Section 263 of the Income Tax Act, whereby-
(a) it was held that as there was no business loss or the loss was less than brought forward unabsorbed depreciation, the brought forwarded depreciation was not to be taken into account while working out the book profits for the purposes of Section 115J of the Income Tax Act, 1961?
(b) he directed the assessing officer to determine the book profit at Rs. 19,09,097 for the purpose of Section 115J as against the book profit determined by the assessee at a negative figure of Rs. 1,64,54,112?
2. Briefly the facts are that for the assessment year 1988-89, on perusal of the assessment record, the Commissioner found that the assessee company had worked out book profits at Rs. 19,09,097. It was also observed that the assessing officer had adjusted brought forward unabsorbed depreciation against the current income and allowed carry forward of the remaining unabsorbed depreciation for being set off against the income of the subsequent assessment years. The Commissioner referred to the provisions of Section 115J of the Income Tax Act, 1961 and observed that unabsorbed loss or unabsorbed depreciation, whichever is less, was to be deducted from the book profits of Rs. 19,09,097. He also observed that in the case of the assessee, there was only brought forward unabsorbed depreciation with no brought forward unabsorbed loss. The Commissioner also referred to the Board’s Circular No. 495, dated 22-9-1987 and held that the assessment order was erroneous insofar as it was prejudicial to the interest of revenue. The assessee was given an opportunity vide notice dated 19-3-1991. The assessee filed written submissions which were considered by the Commissioner, who observed that according to the audited accounts submitted along with the return of income, the income as per Profit and Loss Account was Rs. 19,09,097. He further observed from the audited report that the company had only unabsorbed depreciation and that there was no brought forward loss. He also observed that according to the Board’s Circular No. 495 dated 22-9-1987, the claim of the assessee was not acceptable. The learned Commissioner further analysed the provisions of Section 115J and observed that working of loss and depreciation for the assessment years 1985-86 to 1987-88 showed that the assessee had not suffered any actual loss in those years except the notional loss after deduction of depreciation. He also observed that the brought forward loss was, in fact, nil against substantial brought forward depreciation both as per straight line method and WDV method. He, therefore, held that as there was no business loss or the loss was less than brought forward unabsorbed depreciation, the brought forward depreciation was not to be taken into account while working out the book profit for the purpose of Section 115J of the Income Tax Act, 1961. In the process he also referred to the provisions of Section 205(b) of the Companies Act, 1956 and observed that the Companies Act differentiated between the actual loss and loss after depreciation and that the assessee’s contention that the loss in its case should be taken into consideration after providing for depreciation was not tenable. He, therefore, cancelled the assessment order passed by the assessing officer and directed him to make a fresh assessment according to law.
3. The assessee filed an appeal against the said order before the Tribunal and invited attention to the order of the Tribunal dated 31-1-1992 in ITA No. 2170/Del/1991 in the case of the assessee for the assessment year 1989-90 and submitted that the Tribunal had considered similar issue (as is involved in the present appeal for the assessment year T 988-89) in the case of the assessee and observed that there were net losses in the assessment years 1985-86, 1986-87 and 1987-88 as a result of unabsorbed depreciation. It further observed that in that sense, there were no business loss, but only unabsorbed depreciation and since the lower of the two had to be allowed as a deduction, one view might be that no deduction should be allowed, because there was no business loss at all. It also observed that the other view which was equally plausible was that there were net losses in the said years of Rs. 4,66,509, Rs. 8,78,333 and Rs. 62,04,642 and that the said net amounts, which in common parlance were called losses were less than the depreciation figures of Rs. 45,00,334, Rs. 69,98,196 and Rs. 94,81,334 respectively. It also observed that the lower of the two were obviously figures of net losses and since two views were possible, the one favouring the assessee had to be preferred. It also observed that the case of the assessee was supported by the judgment of the Tribunal reported in Buttwelded Tools (P) Ltd. v. Asstt. CIT . The Tribunal, therefore, directed the assessing officer to deduct the amount of depreciation and on the resultant figure compute 30 per cent of the profits under Section 115J of the Income Tax Act for the assessment year 1989-90. The learned Counsel submitted that the Tribunal has accepted the claim of the assessee in relation to assessment year 1989-90. He further submitted that though a reference has been made to the Hon’ble High Court of Punjab & Haryana, the Tribunal should take a consistent view for the sake of judicial discipline.
4. It is also relevant to mention that the assessee also cited various judgments in his favour including Surana Steels (P) Ltd. and Anr. v. Dy. CIT and argued that the judgment of Hon’ble Andhra Pradesh High Court in the case of V.V. Trans-Investments (P) Ltd. v. CIT is not binding upon the Tribunal. However, the Tribunal after considering the rival contentions held that the issue stood covered by the decision of the Hon’ble Andhra Pradesh High Court in the case of V.V. Trans-Investments (supra) and therefore declined to interfere with the order of the Commissioner.
5. The assessee filed an application under Section 256(1) of the Income Tax Act, 1961 seeking reference of the questions of law to this Court as under:
(1) Whether the Tribunal is correct in law in upholding the order passed by the learned Commissioner under Section 263 of the Income Tax Act holding that the claim of the assessee company that the cash loss alone should be taken into consideration before providing for depreciation is correct and sustainable.
(2) Whether the Tribunal is right in law upholding the order of the learned Commissioner passed under Section 263 by directing the assessing officer to determine the book profit at Rs. 19,09,097 for the purpose of Section 115J as against the book profit determined by the assessee company at a negative figure of Rs. 1,64,54,112?
6. The Tribunal vide its Order dated 21-2-1997 passed in RA No. 705/Del/1996 in ITA No. 3046/Del/1991 referred the modified question as referred in para 1 of the judgment to this Court for its opinion.
7. At the time of hearing, the learned Counsel for the assessee submitted that the question of law referred to this Court is squarely covered in favour of the assessee by a decision of the Hon’ble Supreme Court in Surana Steels (P) Ltd. v. Dy. CIT and Ors. . Learned Counsel also brought to the notice of this Court the judgment dated 11-1-2008 passed by this Court in IT Ref. No. 125 of 1992 (arising out of Appeal No. ITA No. 2170/Del/191 for the assessment year 1989-90) wherein the similar question of law for the assessment year 1989-90 between the parties has already been answered in favour of the assessee and against the revenue.
8. Learned Counsel for the revenue has been unable to controvert this factual and legal position. Hence, in view of the decision of this Court in IT Ref. No. 125 of 1992 and the decision of the Hon’ble Supreme Court in Surana Steels (P) Ltd. (supra), the aforesaid question of law referred to this Court is answered in favour of the assessee and against the revenue.
9. The instant reference stands answered accordingly.