| Case ID |
eb509329-3fb1-4a16-96c9-76f9dec0aacd |
| Body |
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| Case Number |
CIVIL APPEAL Nos. 824 TO 826, 2715 AND 2716 OF 200 |
| Decision Date |
Dec 03, 2002 |
| Hearing Date |
|
| Decision |
The Supreme Court upheld the decision of the High Court, affirming that the deductions permissible under the Income Tax Act must be considered as actually allowed when determining the total income of a company under section 115J(1). The Court clarified that even if a company is taxed on a notional income of 30% of its book profits, the deductions claimed are integral to this calculation. The decision emphasized that section 115J preserves the right to carry forward unabsorbed deductions, aligning with the legislative intent to ensure profitable companies contribute to tax revenue. |
| Summary |
In the landmark case of Karnataka Small Scale Industries Development Corpn. Ltd vs. Commissioner of INCOME TAX, the Supreme Court of India addressed significant issues under the Income Tax Act, 1961, specifically focusing on the provisions of section 115J. The case revolved around the interpretation of tax liabilities for companies classified as 'zero-tax' entities, which, despite being profitable, reported nil income due to various deductions. The Court clarified that deductions claimed by such companies must be recognized as 'actually allowed' in the context of tax assessment, thereby impacting their ability to carry forward unabsorbed losses and allowances. This ruling underscores the importance of ensuring that profitable companies contribute to the tax base, thereby preventing tax avoidance strategies that exploit deductions. The decision not only reaffirms the application of section 115J but also sheds light on the broader implications of tax law in promoting corporate accountability. This case will be essential for companies navigating their tax obligations under the Income Tax Act, encouraging compliance and understanding of the legal framework governing corporate taxation. |
| Court |
Supreme Court of India
|
| Entities Involved |
Not available
|
| Judges |
MS. RUMA PAL,
MRS. B.N. SRIKRISHNA
|
| Lawyers |
S. Ganesh,
K.T. Anantharaman,
Vasudevan Raghavan,
Dhruv Mehta,
R.P. Bhatt,
Ms. Neera Gupta,
Ranbir Chandra,
Ms. Sushma Suri
|
| Petitioners |
Karnataka Small Scale Industries Development Corpn. Ltd
|
| Respondents |
Commissioner of INCOME TAX
|
| Citations |
2002 SLD 2420,
(2002) 258 ITR 770
|
| Other Citations |
CIT v. Dharampur Leather Co. Ltd. [1966] 60 ITR 165 (SC),
Madeva Upendra Sinai v. Union of India [1975] 98 ITR 209 (SC),
CIT v. Mother India Refrigeration Industries (P.) Ltd. [1985] 4 SCC 1,
Mancheri Puthusseri Ahmed v. Kuthiravattam Estate Receiver [1996] 6 SCC 185,
CIT v. J.H. Gotla[1985] 156 ITR 323/23 Taxman 14J (SC),
Suryalatha Spg. Mills Ltd. v. Union of India [1997] 223 ITR 713/ 93 Taxman 310 (AP),
Lallacherra Tea Co. (P.) Ltd. v. CIT [1999] 239 ITR 611 (Gauhati)
|
| Laws Involved |
Income Tax Act, 1961,
Indian Companies Act, 1956
|
| Sections |
32,
256(1),
38,
37,
41,
34,
30,
35,
80J,
43,
36,
28,
115J(1),
72,
73,
74,
29,
31,
33,
39,
40,
42,
44,
Parts II and III of Schedule VI
|