JUDGMENT:

Dalveer Bhandari, J.

1. These appeals are directed against the judgment passed by a Division Bench of the Kerala High Court at Ernakulam on 13th November, 2001 whereby the High Court has decided Income Tax Reference Nos.245, 259, 289 and 293 of 1999 by a common judgment.

2. The main question which arose for consideration before the Court below was:

Whether in respect of a company consistently charging depreciation in its books of account at the rates prescribed in the Income-tax Rules, the Income Tax Officer has jurisdiction under section 115J of the Income Tax Act, 1961 to rework net profits by substituting the rates prescribed in Schedule XIV of the Companies Act, 1956?

3. The concept of a minimum tax on zero tax companies was introduced under section 80VVA of the Income Tax Act, 1961 (hereinafter referred to as the 1961 Act ) when a ceiling was placed on allowances by the Finance Act, 1983 with effect from the Assessment Year 1984-85. However, the allowances unabsorbed, because of the restriction imposed by the ceiling, were carried forward, so that they could be absorbed in a later year, if adequate profits are available. Section 80VVA was dropped from the statute by the Finance Act, 1987, with effect from A.Y. 1988-89, when replaced Book Profits Tax by section 115J of the 1961 Act. But it was materially different in one respect that no part of the tax on book profits could be adjusted against tax on regular assessment at a future date.

4. It may be pertinent to mention that the Book Profit Tax was abandoned with effect from A.Y. 1990-91 by the Finance Act, 1990. It was re- introduced with a new name Minimum Alternate Tax with effect from A.Y. 1997-98 under section 115JA.

5. For ready reference, we deem it appropriate to reproduce section 115J of the 1961 Act as under:

115-J. 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 day of April, 1988 but before the 1st day of 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.

(1-A) Every assessee, being a company, shall, for the purposes 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- section (1-A), as increased by

(a) the amount of income tax paid or payable, and the provision therefor; or

(b) the amounts carried to any reserves other than the reserves specified in Section 80-HHD or sub-section (1) of Section 33-AC, 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 Section 80-HHD, where it has been utilised for any purpose other than those referred to in sub- section (4) of that section; or

(h) the amount credited to the reserve account under Section 80-HHD, to the extent that amount has not been utilised within the period specified in sub- section (4) of that