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Judgment
R.K. Agrawal, J.—The income tax Appellate Tribunal has referred the following two questions of law u/s 256(1) of the income tax Act, 1961 (hereinafter referred to as "the Act") for opinion to this Court:-
"1. Was the Hon''ble ITAT on facts and circumstances of the case justified in law in confirming the order of Ld. Commissioner (Appeals) and in holding that word ''loss'' as occurring in clause (b) of the first proviso to sub-section (1) of section 205 of the Companies Act will mean loss including depreciation even in absence of definition of term ''loss'' occurring either in the Companies Act, 1956 or in the income tax Act, 1961?
Was the Hon''ble ITAT on facts and circumstances of the case justified in law in dismissing the departmental appeal, specially in view of the favourable decision of the Hon''ble Andhra Pradesh High Court in the case of V.V. Trans-investments (P.) Ltd. Vs. Commissioner of Income Tax, ?"
The reference relates to the assessment year 1990-91.
Briefly stated, the facts giving rise to the present reference are as follow:-
The assessee, a private limited company, deriving from manufacture and sale of surgical cotton, filed its return on 26-12-1990 in respect of the assessment year 1990-91, showing a loss of Rs. 87,206. Assessment u/s 143(3) of the Act was completed on 30-8-1991 on a total income of Rs. 35,964 by invoking provisions of section 115J of the Act. In computing that book profits, the Assessing Officer allowed losses amounting to Rs. 73,145 for earlier years as they fell less when compared to unabsorbed depreciation of these years. The assessee preferred an appeal which was allowed by the Commissioner (Appeals), following the Tribunal''s decision dated 29-2-1992 in the case of Kanodia Polychem (P.) Ltd. for the assessment year 1989-90 where it was held that the word ''loss'' will include depreciation for the purpose of computing book profits and section 115J and accordingly directed the Assessing Officer to set off from the book profits the depreciation or loss including depreciation, whichever was less. The Department went up in appeal before the Tribunal, which was dismissed following the decision, referred to above.
We have heard Sri R.K. Upadhaya, learned Standing Counsel for the revenue.
We find that the question raised herein is squarely covered by a decision of the Apex Court in the case of Surana Steels (P.) Ltd. v. Dy. CIT [1999] 237 ITR 777 1, wherein the Apex Court has held that the ''loss'' used in the provision of the Companies Act includes depreciation. We accordingly answer the questions referred to us in favour of the assessee and against the revenue. There shall be no order as to costs.