Commissioner of Income Tax vs Brite Autmotive and Plastics Ltd.

A.R. Tiwari, J.—The Commissioner of Income Tax , Bhopal, has filed this application u/s 256(2) of the Income Tax Act, 1961 (for short "the Act"), seeking direction to the Tribunal to state the case and refer the proposed question, as noted below, for our opinion, arising out of the order dated May 8, 1993, passed by the Tribunal in I. T. Appeal No. 601/ IND of 1992 after rejection of the application presented u/s 256(1) of the Act and registered as R. A. No. 97/IND of 1993 on April 29, 1994, for the assessment year 1989-90 :

"Whether on the facts and in the circumstances of the case, the Tribunal was justified in law in deducting unabsorbed depreciation of Rs. 17,27,166 in place of unabsorbed business loss of Rs. 7,04,207 for determining the book profit of the year ?"

Briefly stated, the facts of the case are that after making adjustment u/s 143(1)(a) of the Act, the book profit u/s 115J of the Act was worked out at Rs. 10,22,959 and thus the total income at the rate of 30 per cent. was determined at Rs. 3,06,890 by the Assessing Officer. Net profit of the assessee for the assessment year 1989-90, as per profit and loss account, was Rs. 17,27,166. In the immediate preceding year 1988-89, the business loss of the assessee was Rs. 7,04,207 and unabsorbed depreciation was Rs. 17,74,568. The total thus came to Rs. 24,78,775. The Assessing Officer allowed deduction of unabsorbed business loss from the profits to arrive at book profits. By an application u/s 154, the assessee requested the Assessing Officer to allow deduction of unabsorbed depreciation from profits while calculating book profits u/s 115J as it was less than the total of business loss including unabsorbed depreciation. The Assessing Officer negatived the claim. The Commissioner of Income Tax (Appeals) confirmed the order of the Assessing Officer in appeal. The Tribunal however, held that the expression "the amount of the loss" appearing in Clause (b) of the proviso to Section 205(1) of the Companies Act should be construed to mean the loss including depreciation and unabsorbed depreciation. It, therefore, found the total loss more than the unabsorbed depreciation and issued direction to calculate book profits accordingly. This resulted in nil income. Aggrieved, the Department filed an application u/s 256(1) of the Act, which was rejected. The Department then filed this application u/s 256(2) of the Act on the ground stated in para 7 of the application.

We have heard D. D. Vyas, learned counsel for the applicant/Department, and G. M. Chaphekar, learned senior counsel, with S. S. Samvatsar, for the non-applicant/assessee.

Counsel for the applicant submitted that the aforesaid question is one of law and merits to be referred. On the other hand, counsel for the non-applicant submitted that the aforesaid question is based on appreciation of facts and does not give rise to any referable question of law.

We find that the Tribunal allowed the appeal of the assessee as under :

"In view of the above discussion, it is held that the computation of loss must necessarily include the amount of depreciation and unabsorbed depreciation. In the instant case, the loss being larger than the unabsorbed depreciation, the assessee is entitled to set off of the amount of unabsorbed depreciation. In the instant case, the unabsorbed depreciation is also not fully absorbed and, therefore, the book profit needs to be taken at nil."

The Tribunal considered the relevant provisions of law and applied its mind to the decisions reported in M/s. Garden Silk Weaving Factory, Surat Vs. The Commissioner of Income Tax, Gujarat, Ahmedabad, and Commissioner of Income Tax, Calcutta Vs. Jaipuria China Clay Mines (P) Ltd., and concluded in favour of the assessee.

The Tribunal declined to state the case and refer the question, as proposed, in the undernoted terms :

"The above finding, in our opinion is a finding of fact based on appreciation of the facts available on record. This finding, in our opinion, does not give rise to a question of law. We, therefore, refuse to grant the reference."

We are satisfied that the conclusion of the Tribunal is based on appreciation of the facts which is not liable to be faulted with. In Commissioner of Income Tax (Central), Calcutta Vs. Ashoka Marketing Ltd., and in Commissioner of Income Tax, Andhra Pradesh Vs. Kotrika Venkataswamy and Sons, it is held that a conclusion based on appreciation of facts does not give rise to any question of law.

The reference is not sought on the ground that there is no evidence or that the conclusion is perverse- The counsel for the applicant is unable to show as to how the aforesaid question is a question of law. The order of the Tribunal is based on a proper appreciation of facts and correct application of law. There is thus no position of referable question of law.

In the result we reject this application but without any orders as to costs.

Counsel''s fee for each side is, however, fixed at Rs. 750, if certified.