Andhra Pradesh H.C : the constitutional validity of s. 115J of the IT Act, 1961, is questioned.

High Court Of Andhra Pradesh

Suryalatha Spinning Mills Ltd. & Anr. vs. Union Of India & Anr.

Section 115J, Art. 226

Syed Shah Mohammed Quadri & Y.V. Nararyana, JJ.

Writ Petitions Nos. 8060l 8061 & 12086 of 1992 & 2221 of 1993

20th February, 1996

Counsel Appeared

S. Ravi, for the Petitioners : V. Prabhakar & Muralikrishnia, for the Petitioner : S. R. Ashok, for the Respondents

SYED SHAH MOHAMMED QUADRI, J.

In these four writ petitions, the constitutional validity of s. 115J of the IT Act, 1961, is questioned. As the question raised in these writ petitions is common, they were heard together and are being disposed of by a common judgment. For appreciating the contentions raised in these writ petitions, we would refer to the facts in Writ Petition No. 8060 of 1992.

2. The first petitioner in this writ petition is a public limited company which is registered under the Companies Act, 1956. The second petitioner is one of the equity shareholders of the first petitioner-company. It is stated that under the provisions of the Companies Act, the petitioner is required to prepare the balance- sheet and the profit and loss account in accordance with Schedule VI to the said Act. For the financial year 1989-90, i.e., 1st April, 1989, to 31st March, 1990, the petitioner disclosed Rs. 65,52,925 as the net profit. The petitioner filed income-tax returns for the said year claiming that under s. 32(2) of the Act, the company had unabsorbed depreciation allowance of Rs. 11,99,745 which the petitioner was entitled to carry forward; the petitioner had also investment allowance computed in accordance with the provisions of s. 32A of the Act at Rs. 49,59,734 which remained unabsorbed. After necessary adjustment of the other allowances and expenses, the income for that year was determined at Rs. 61,59,479. But after setting off the brought forward depreciation and investment allowance for the assessment year, the income of the petitioner for the asst. yr. 1990-91 became nil. The petitioner says that s. 115J was inserted by the Finance Act, 1987, and a new concept of book profit was introduced; and the provisions of s. 80VVA were deleted. By virtue of the operation of the newly inserted provision 115J, the book profits liable to tax were determined at Rs. 29,25,878 and tax of Rs. 14,62,939 computed at 50 per cent. and surcharge of Rs. 1,17,035 at eight per cent. of the income-tax, totalling to Rs. 15,79,974 were paid along with returns of income for the year 1990-91. It is added that for the asst. yr. 1991-92, the petitioner had the profit of Rs. 1,10,64,691. After making necessary adjustments as per the Act and the rules framed thereunder, the taxable income was arrived at Rs. 18,63,394 on which tax together with surcharge was paid at Rs. 8,57,160. The petitioner-company deducted the income determined for the asst. yr. 1991-92 under the provisions of s. 115J and claimed to set off the notional income on which it has suffered tax for the year 1990-91. That was not allowed by the ITO. The petitioner, therefore, challenges the constitutional validity of s. 115J saying, it is unconstitutional and violative of Arts. 14 and 19(1)(g) of the Constitution of India.

In the counter-affidavit filed by the Revenue, it is stated that the minimum tax on companies was dealt with by s. 80VVA which was inserted in 1983 but from the year 1988-89 that provision was deleted and s. 115J was inserted. Sample studies carried out by the CBDT revealed that while the provisions of s. 80VVA have had the effect of subjecting the companies to minimum tax which they would not have otherwise paid, there were still companies which had no income-tax liability despite substantial profits. This was due to the fact that the companies were availing of depreciation in full under the IT Act, and thus the phenomena of prosperous zero-tax companies continued. There were about 650 such companies during the relevant asst. yr. 1984-85. About 28 percent. of the companies (139 companies) accounting for a net profit of Rs. 274 crores showed no tax liability. So after conducting a careful study, by the Finance Act, 1987, s. 80VVA was deleted and s. 115J was introduced by way of an independent Chapter XII-B in the IT Act and it came into force from the asst. yr. 1988-89. It is only when the total income of a company under the provisions of the IT Act, in respect of any accounting year, of any company, is less than 30 per cent. of its book profits for purposes of charging income-tax, that 30 per cent. of the book profit is treated as income. Subject to some adjustments, the book profits became the basis of taxation or assessability of income-tax. The figures given by the petitioner company in its return for the asst. yr. 1991-92 are not disputed. But it is stated that there is no rationality in claiming deduction of the income assessed under s. 115J for the asst. yr. 1990-91 and there is no substance in the contention that there would be double taxation. It is not correct that s. 115J creates any hostile discrimination as alleged. Parliament in its wisdom chose the corporate sector for taxing under s. 115J of the Act and the same is not open to challenge on the ground of discrimination. The Government policy of taxation strikes a balance between promotion of investment in development and levy and recovery of taxes for the purposes of developmental activities and keeping in view these factors amongst others, the Government formulated the taxation policy. For these reasons, it is prayed that the writ petitions be dismissed.

Sri Ravi, learned counsel for the petitioners, who led the batch, concentrated on the question of carry forward of unabsorbed losses and unadjusted allowances under sub-s. (2) of s. 115J when notional income becomes the subject-matter of assessment under sub-s. (1) of s. 115J of the Act. In other words, his submission is that where the notional income of a company is taxed, having regard to the provisions of s. 115J(1), the unabsorbed loss and unadjusted allowances, etc., of an amount equal to the taxed income should be allowed to be carried forward, otherwise it would result in double taxation. He has elaborated his argument with reference to the example given in the Boards Circular No. 495, dt. 22nd Sept., 1987 (see (1987) 168 ITR (St.) 87); if unabsorbed losses or unadjusted allowances, equal in quantum to the income which is subject to tax under s. 115J(1), are not allowed to be carried forward to the next year, then submits the learned counsel, the provisions of s. 115J(1) would be liable to be struck down on the ground of violation of Art. 14 as well as on the ground of double taxation so to save them from the vice of unconstitutionality it is necessary to interpret sub-s. (2) of s. 115J in such a manner as to make the carry forward of the unabsorbed losses and unadjusted allowances, equal in amount to the income calculated under s. 115J(1), permissible.

5. Sri Muralikrishna, learned counsel appearing for the petitioner in Writ Petition No. 2221 of 1993, while adopting the arguments of Sri Ravi, adds that once the taxable income of the company is determined under sub-s. (1) of s. 115J that should form the basis for the purpose of determining the unabsorbed depreciation, business losses and other allowances to be carried forward and setoff against the income for the subsequent year, in other words, he submits that on determining the taxable income under s. 115J(1) the corresponding amount of the scientific research expenditure that could be absorbed against that income, should be allowed to be carried forward to the next assessment year under subs. (2) of s. 115J; if any other interpretation is given to s. 115J(2), then s. 115J(1) would be rendered unconstitutional.

6. Sri S. R. Ashok, learned standing counsel appearing for the Revenue, has contended that under the garb of interpreting sub-s. (2) of s. 115J, the assessee cannot nullify the purpose of the legislation and the scheme introduced under s. 115J(1) of the Act. His contention is if sub-s. (2) of s. 115J is interpreted in the manner suggested by learned counsel for the petitioners, it would lead to anomalous consequences as the amounts that could be carried forward under sub-s. (2) of s. 115J would fall either under unabsorbed investment allowance or unabsorbed depreciation or unabsorbed loss or benefit under s. 80J and each of them had its own restriction both with regard to time-limit as also with regard to computation. Had Parliament intended to provide such a relief under sub-s. (2) of s. 115J, it should have said so in that provision and it is not open for the petitioners to read in sub-s. (2) something which has not been provided by Parliament. He submits that the example given in Board’s Circular No. 495, dt. 22nd Sept., 1987 (see (supra), is the correct interpretation of sub-s. (2) of s. 115J. He has also contended that s. 115J(1) is not open to challenge on any of the grounds urged by the petitioners.

We shall first deal with the contention of learned counsel for the petitioners in regard to carry forward of unabsorbed losses or unadjusted allowances, etc., under sub-s. (2) of s. 115J. It will be useful to read here s. 115J which runs as under: “115J. Special provisions relating to certain companies.—(1) Notwithstanding anything contained in any other provision of this Act, where in the case of an assessee being a company (other than a company engaged in the business of generation or distribution of electricity), 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 April, 1988, but before the 1st April, 1991 (hereafter in this section referred to as the relevant previous year), is less than thirty per cent. of its book profit, the total income of such assessee chargeable to tax for the relevant previous year shall be deemed to be an amount equal to thirty per cent. of such book profit. (1A) Every assessee, being a company, shall, for the purpose 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 (1 of 1956). Explanation.—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-s. (1A), as increased by— (a) the amount of income-tax paid or payable, and the provision therefore ; or (b) the amounts carried to any reserves (other than the reserves specified in s. 80HHD or sub-s. (1) of s. 33AC), by whatever name called; or (c) the amount or amounts set aside to provisions made for meeting liabilities other than ascertained liabilities; or (d) the amount by way of provision for losses of subsidiary companies; or (e) the amount or amounts of dividends paid or proposed; or (f) the amount or amounts of expenditure relatable to any income to which any of the provisions of Chapter III applies; or (g) the amount withdrawn from the reserve account under s. 80HHD, where it has been utilised for any purpose other than those referred to in sub-s. (4) of that section; or (h) the amount credited to the reserve account under s. 80HHD, to the extent that amount has not been utilised within the period specified in sub-s. (4) of that section; or (ha) the amount deemed to be the profits under sub-s. (3) of s. 33AC; if any amount referred to in cls. (a) to (f) is debited or, as the case may be, the amount referred to in cls. (g) and (h) is not credited to the profit and loss account, and as reduced by,— (i) the amount withdrawn from reserves (other than the reserves specified in s. 80HHD) or provisions, if any such amount is credited to the profit and loss account: Provided that, where this section is applicable to an assessee in any previous year (including the relevant previous year), the amount withdrawn from reserves created or provisions made in a previous year relevant to the assessment year commencing on or after the 1st April, 1988, shall not be reduced from the book profit unless the book profit of such year has been increased by those reserves or provisions (out of which the said amount was withdrawn) under this Explanation; or (ii) the amount of income to which any of the provisions of Chapter III applies, if any such amount is credited to the profit and loss account; or (iii) the amounts (as arrived at after increasing the net profit by the amounts referred to in cls. (a) to (f) and reducing the net profit by the amounts referred to in cls. (i) and (ii)) attributable to the business, the profits from which are eligible for deduction under s. 80HHC or s. 80HHD; so, however, that such amounts are computed in the manner specified in sub-s. (3) or sub-s. (3A) of s. 80HHC or sub- s. (3) of s. 80HHD, as the case may be; or (iv) the amount of the loss or the amount of depreciation which would be required to be set-off against the profit of the relevant previous year as if the provisions of cl. (b) of the first proviso to sub-s. (1) of s. 205 of the Companies Act, 1956 (1 of 1956), are applicable. (2) Nothing contained in sub-s. (1) shall affect the determination of the amounts in relation to the relevant previous year to be carried forward to the subsequent year or years under the provisions of sub-s. (2) of s. 32 or sub-s. (3) of s. 32A or cl. (ii) of sub-s. (1) of s. 72 or s. 73 or s. 74 or subs. (3) of s. 74A or sub-s. (3) of s. 80J.”

7. By the Finance Act, 1987, Chapter XIIB containing a lone section, viz., s. 115J, extracted above, was inserted w.e.f. 1st April, 1988. It replaced s. 80VVA and remained in force for three years, viz., 1988-89, 1989-90 and 1990-91. Sec. 80VVA had placed certain restrictions on allowances of various incentives allowable under the Act. But the unabsorbed part of the allowances was allowed to be carried forward to the subsequent year; however, that does not cover depreciation allowances or setting off business losses. The object of insertion of s. 115J is to ensure levy of minimum tax on what are known as “prosperous” zero-tax companies. Such companies were showing huge profits in the profit and loss account and were also declaring dividends to the shareholders but on account of various incentives and increase in depreciation rates, among others, were showing very less or Nil taxable total income. Under the scheme of the above section which is a self- contained provision, certain companies whose total income as computed under the provisions of the IT Act, in respect of the previous year relevant to the assessment year after 1st April, 1988, is less than 30 per cent. of their book profits the total income of such companies chargeable to income-tax for the relevant previous year, is treated as an amount equal to 30 per cent. of such book profits and is taxed accordingly. It also provides for certain adjustments by way of adding amounts and granting deductions for computing the chargeable income under s. 115J(1). Sub-s. (2), with which we are concerned, says that the provisions of sub-s. (1) shall not affect the determination of the amounts in relation to the relevant previous year to be carried forward to the subsequent year or years under: (a) sub-s. (2) of s. 32; or (b) subs. (3) of s. 32A; or (c) cl. (ii) of sub- s. (1) of s. 72; or (d) s. 73; or (e) s. 74; or (f) sub-s. (3) of s. 74A; or (g) sub-s. (3) of s. 80J. Sub-s. (2) is only a saving provision. It provides that determination of the amounts in relation to the relevant previous year to be carried forward to the subsequent year or years under the provisions, enumerated above, will have to be made unaffected by the provisions in sub-s. (1) of s. 115J. It is argued that having regard to sub-s. (1), determination of the amounts to be carried forward of losses, etc., referred to above, three propositions are possible, viz.: (i) Once the income is determined under sub-s. (1) in an assessment year, from that year unabsorbed losses and unadjusted allowances, etc., mentioned above, cannot be carried forward any more because by operation of sub-s. (1) of s. 115J, a new scheme has come into effect which puts an end to the carrying forward of losses, etc.; (ii) On the determination of the taxable income, under the relevant provisions of the Act, whatever amounts remain to be carried forward as per regular computation, either by way of unabsorbed losses or unadjusted allowances, etc., the same be carried forward to the next year ignoring the fact that a notional income is made taxable under sub-s. (1); (iii) The taxable income arrived at under sub-s. (1) of s. 115J should be deemed as available for purposes of setting of unabsorbed losses or unadjusted allowances, etc., in that assessment year but postponed to the next year without allowing the actual adjustment.

11. In our considered view sub-s. (2) gives statutory recognition to the proposition (ii) and gives no scope to entertain propositions (i) and (iii). We would examine these propositions and the merits of the Boards Circular No. 495, dt. 22nd Sept., 1987 (see (supra), interpreting sub-s. (2) of s. 115J. The circular recites that it is an accepted canon of taxation to levy tax on the basis of ability to pay; however, as a result of various tax concessions and incentives, some companies which are making huge profits and also declaring substantial dividends, have been managing their affairs in such a way as to avoid payment of income-tax and accordingly as a measure of equity s. 115J has been introduced by the Finance Act, 1987. Under the new provision, in the case of a company whose total income, as computed under the provisions of the IT Act is less than 30 per cent. of the book profit, computed under the section, the total income chargeable to tax will be 30 per cent. of the book profit as computed. The book profit will be the net profit as shown in the profit and loss account prepared in accordance with the provisions of the Sixth Schedule to the Companies Act, 1956, after certain adjustments. This provision involves two processes. First, the assessing authority has to determine the income of the company under the provisions of the IT Act and, secondly, the book profit has to be worked out in accordance with the Explanation below s. 115J(1A), then it will have to be seen whether the total income determined under the first process is less than 30 per cent. of the book profit; if so, sub-s. (1) would be invoked and the total income of such a company chargeable to income-tax for the relevant previous year shall be equal to 30 per cent. of such book profit.

12. Sub-s. (2) of s. 115J provides that the application of this process shall not affect the carry forward of unabsorbed depreciation, unabsorbed investment allowance, business losses, deficiency under sub-s. (3) of s. 80J to the extent not set-off, as computed under the IT Act. It is illustrated in the said Board’s circular as under (see (1987) 168 ITR (St.) 111): Year 1984 . (Rs.) . (Rs.) Loss excluding . Loss excluding depreciation 3,00,000 depreciation 80,000 Depreciation 1,00,000 Depreciation 4,00,000 Year 1985 Profit before depreciation 5,00,000 Profit before depareciation 5,00,000 Less: Depreciation . Less: Depreciation 4,00,000 as per books 2,00,000 . . . 3,00,000 . 1,00,000 Less: Deduction 1,00,000 Less: Business loss 80,000 under s. 205(2) for for 1984 the year 1984 . 2,00,000 . 20,000 C. F. Business loss 1984 3,00,000 Less: Unabsorbed 20,000 depreciation . .. Nil . . C. F. unbabsorbed 3,80,000 depreciation 1985 . … Year 1986 Net loss as per books . Business loss (-) 10,00,000 before depreciation (-) . . 10,00,000 Depreciation 2,00,000 Add: Depreciation . . . as per IT. Rules (-) 4,00,000 Business loss to be . . . carried forward (-) . . 10,00,000 Unabsorbed depreciation . . . to be carried forward (-) 2,00,000 . . Year 1987 Net profit 10,00,000 Profit before 10,00,000 depreciation Book depreciation 2,00,000 Less: Depreciation as 8,00,000 per IT. Rules . . . 2,00,000 . . Less: Carried forward business loss for 1986 to the extent adjusted 2,00,000 . . Assessed income Nil . Rs. Application of s. 115J Profit before depreciation 10,00,000 Less: Book depreciation 2,00,000 . 8,00,000 Less: Deduction under s. 205(2) 2,00,000 . 6,00,000 Out of the amount whichever is less: . 1984 : Business loss 3,00,000 1986 : Business loss 10, 00,000 Total loss 13,00,000 1986 : Depreciation 2,00,000 Assessable income 30 per cent. of Rs. 6 lakhs ,i.e., 1.8 lakhs . Amount ot be carried forward as per sub-s. (2) of s. 115J . 1984 : Unabsorbed depreciation 3,80,000 1986 : Business loss 8,00,000 Unabsorbed depreciation 4,00,000

13. The contents of the above circular r/w the example given thereunder, extracted above, would make it evident that there is no scope for the Revenue to contend that in view of the provision of sub-s. (1), the unabsorbed depreciation allowance, unadjusted loss or deficiency, etc., as the case may be, can no longer be carried forward to the subsequent year or years. The second proposition represents the stand of the Revenue, while the assessee presses into service the third proposition. In the light of the example given in the circular of the Board, we shall consider these aspects. At the end of the year 1985, it is noted, the company was having carried forward unabsorbed depreciation of Rs. 3,80,000. In the year 1986, the company was having net loss of Rs. 10,00,000, depreciation of Rs. 2,00,000 and unabsorbed depreciation of Rs. 2,00,000 to be carried forward; further business loss to be carried forward in a sum of Rs. 10,00,000, thus it was having business loss of Rs. 10,00,000 and total depreciation of Rs. 4,00,000. But in the year 1987, the company had net profit of Rs. 10,00,000 and book depreciation of Rs. 2,00,000; the depreciation as per the IT Rules was Rs. 8,00,000. After deducting depreciation under the IT Rules, the income was reduced to Rs. 2,00,000. Against this income of Rs. 2,00,000, out of the unadjusted loss of 1986 amounting to Rs. 10,00,000, a sum of Rs. 2,00,000 would get adjusted leaving the assessable income as nil. Now under the Companies Act, from out of the profits of Rs. 10,00,000, the book depreciation of Rs. 2,00,000 was deducted reducing the income to Rs. 8,00,000; under s. 205(2) of the Companies Act, a sum of Rs. 2,00,000 was deducted leaving the income of Rs. 6,00,000, after adjusting under the Explanation, 30 per cent. of Rs. 6,00,000, i.e., Rs. 1.8 lakhs would be taxable under sub-s. (1) of s. 115J. Proposition (ii) which is in accordance with sub-s. (2) of s. 115J would entitle the company to carry forward unabsorbed depreciation of Rs. 3,80,000 unadjusted depreciation of Rs. 4,00,000 and business loss of Rs. 8,00,000. So far as the first two items are concerned, there is no controversy. Regarding the unabsorbed business loss of Rs. 8,00,000, what is contended is that out of carried forward business losses of Rs. 10,00,000, only Rs. 2,00,000 of business loss was adjusted as the amount of income was reduced to nil; however, as the Revenue is assessing the company to income-tax on Rs. 1.8 lakhs, the income arrived at under s. 115J(1), whereas, in fact, income as per income-tax calculations is nil; the unadjusted depreciation and/or business loss which is available for adjustment but could not be adjusted against the said taxable income, that is, so much of the loss as can be adjusted against Rs. 1.80 lakhs should be allowed to be carried forward to the next year. We find it difficult to accede to the contention of learned counsel for the petitioners for reasons more than one. Firstly, for the purpose of arriving at the total taxable income under the provisions of the IT Act, out of the carried forward loss, a sum of Rs. 2 lakhs was already adjusted and that resulted in the nil income and business loss, unabsorbed of Rs. 8,00,000 which is allowed to be carried forward, as such the claim to carry forward Rs. 1,80,000, equal to taxable income under sub-s. (1) is misconceived. Secondly, because sub-s. (2) of s. 115J of the Act is a saving provision and does not confer any further right, the amount of income arrived at for the purpose of exigibility of income-tax under sub-s. (1) of s. 115J, cannot be taken note of, while considering the question of carrying forward of unadjusted loss. Thirdly, the very object of the provision of s. 115J is to tax such companies which are making huge profits and also declaring substantial dividends, but are managing their affairs in such a way as to avoid payment of income-tax, as a result of various tax concessions and incentives and for that purpose the taxable income is determined under sub-s. (1) of s. 115J, if any loss equal to the income thus determined is allowed to be adjusted, then that would frustrate and nullify the very object of enacting the provision. In our view, from a plain reading of sub-s. (2) of s. 115J, it is very clear that the quantum of unabsorbed losses, unadjusted depreciation, etc., for the purpose of carrying forward has to be under the provisions of the Act, irrespective of the quantum of income determined under the provisions of sub- s. (1) of s. 115J. We, therefore, find no illegality in the example of calculations given in the Board Circular No. 495, dt. 22nd Sept., 1987 (see (supra). This takes us to the second contention which was somewhat faintly contended and that is, if operation of sub-s. (2) of s. 115J, as given in the Boards circular is accepted, the provision of subs. (1) of s. 115J would be rendered unconstitutional, as it will be discriminatory and violative of Arts. 14 and 19(1)(g) of the Constitution of India. The discrimination alleged is that the provision is applicable only to companies but not to other units of taxation. This contention in our view is without any substance. In Jain Bros. vs. Union of India (1970) 77 ITR 107 (SC), the Supreme Court observed that it was well-settled that in fiscal enactments the legislature had a larger discretion in the matter of classification so long as there is no departure from the rule that persons included in a class were not singled out for special treatment. In that case the classification of firms as the registered firm and the unregistered firm and taxing them differently, was questioned as arbitrary and violative of Art. 14. It was held that it was open to the legislature to say that once a registered firm committed a default attracting penalty, it should be deemed or considered to be an unregistered firm for the purpose of imposition of penalty and no question of discrimination under Art. 14 could arise in such a situation. It was also observed that there was nothing to prevent the Legislature from giving the benefit of a reduced rate to a registered firm for the purpose of tax but withholding the same when it committed a default and became liable to imposition of penalty.

16. On the question of applicability of Art. 14 to fiscal legislation, in ITO vs. N. Takin Roy Rymbai 1976 CTR (SC) 154 : (1976) 103 ITR 82, the Supreme Court has laid down as under: “In taxation laws the State has, in view of the intrinsic complexity of fiscal adjustments of diverse elements, a considerably wide discretion in the matter of classification for taxation purposes. Legislature has ample freedom to select and classify persons, districts, goods, properties, incomes and objects which it would tax and which it would not tax. So long as the classification made within this wide and flexible range by a taxing statute does not transgress the doctrine of equality it is not vulnerable to attack on the ground of discrimination merely because it taxes or exempts from taxation, some incomes or objects and not others. Nor is the mere fact that a tax falls more heavily on some in the same category, by itself a ground to render the law invalid.”

17. The same principle is reiterated in R. K. Garg vs. Union of India (1981) 25 CTR (SC) 406 : (1982) 133 ITR 239 (SC) and Kerala Hotel & Restaurant Association vs. State of Kerala (1990) 77 STC 253; (1990) 2 SCC 502.

18. Before concluding the discussion on this aspect, we may usefully refer to the judgment of the Division Bench of the Delhi High Court in National Thermal Power Corpn. Ltd. vs. Union of India (1991) 96 CTR (Del) 140 : (1991) 192 ITR 187, wherein the Division Bench has held that the provision of s. 115J is not violative of Art. 14 or 19(1) of the Constitution.

19. We are in respectful agreement with the view expressed by the learned judges.

20. The next contention is that sub-s. (1) of s. 115J results in double taxation. We are unable to appreciate this contention. Firstly, because what is being taxed is income determined on the basis prescribed under the said impugned provision and there is no provision to re-tax the same income as such, as of fact there is no double taxation. And, secondly, because double taxation per se would not render an otherwise valid provision, invalid. (See Jain Bros. vs. Union of India) (supra). However, learned counsel submits that if the losses, etc., which are not set-off or adjusted against the income determined as taxable under s. 115J(1) and are not allowed to be carried forward, it would result in double taxation. We do not think so. The right to carry forward losses, unadjusted allowances, etc., is kept intact by sub-s. (2) of s. 115J; merely because the amount equal to the income determined as taxable under sub-s. (1) is not treated as unabsorbed loss, etc., which under no provision of the Act can be so treated, it cannot be said that there is double taxation.

21. For the aforementioned reasons, the writ petitions are without any substance and accordingly we dismiss them; having regard to the circumstances of the cases, we make no order as to costs.

[Citation : 223 ITR 713]

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