2012 (10) TMI 216 - AT - Income Tax

Disallowance u/s 43B(f) towards provisions for leave encashment - Held that - As decided in assessee s own case in the preceding years that both the parties admitted that as per sec 43B(f) amount unpaid in respect of leave encashment deserves to be disallowed - against assessee. Disallowance u/s 14A - Held that - Respectfully following the decision in the preceding year, in the current year also, we feel it appropriate to restore the issue to the file of the AO, with the direction to recompute the disallowance u/s 14A - in favour of assessee by way of remand. Interest u/s 234B & 234C - exclusion while computing the book profits under section 115JB - Held that - As decided in Jtc. I. T., Mumbai Versus M/s Rolta India Ltd. 2011 (1) TMI 5 - SUPREME COURT OF INDIA there is no exclusion of section 115J/115JA in the levy of interest under section 234B. The expression assessed tax is defined to mean the tax assessed on regular assessment which means the tax determined on application of section 115J/115JA in the regular assessment. Interest under section 234B is payable on failure to pay advance tax in respect of tax payable under section 115JA - against assessee. Carry forward of unabsorbed depreciation loss of earlier years without setting off the same against the capital gains - Held that - The provisions of the Act are very clear and the plain meaning simply suggests that adjustment is required to be made and the AR s reliance of the word may used in section 71(2), saying, it means that the Act gives an option to the assessee either to adjust or not to adjust business loss with capital gains will be of no use, because in the General Clauses Act, the word may has been interpreted to mean as shall, also, and in that case, the provisions of section 71(2) shall become absolute. View taken by the revenue authorities and pointed out that under all circumstances unabsorbed depreciation shall become current years depreciation, which shall in any case will have to be given first adjustment against any income is acceptable - against assessee.

Summary

Issues:
1. Disallowance of provisions for leave encashment under section 43B(f).
2. Disallowance under section 14A r.w.r 8D and computation of Book Profit under section 115JB.
3. Levy of interest under sections 234B & 234C while computing book profits under section 115JB.
4. Treatment of unabsorbed depreciation against capital gains and taxability under section 115JB.

Issue 1: Disallowance of provisions for leave encashment under section 43B(f):
The appellant contested the disallowance of Rs. 2,92,055 under section 43B(f) concerning provisions for leave encashment. The ITAT upheld the order of the CIT(A) based on a previous year's decision where both parties agreed on the disallowance. Consequently, the appeal was rejected for this ground.

Issue 2: Disallowance under section 14A r.w.r 8D and computation of Book Profit under section 115JB:
The ITAT referred to a previous year's decision and set aside the issue of disallowance under section 14A, directing the Assessing Officer to recompute it. The direction aimed to ensure consistency with the preceding year's disallowance calculation. The order of the CIT(A) was overturned, and the issue was treated as allowed for statistical purposes.

Issue 3: Levy of interest under sections 234B & 234C while computing book profits under section 115JB:
The ITAT rejected the appellant's appeal against the levy of interest under sections 234B & 234C, citing a Supreme Court case where it was established that interest under section 234B is payable even in cases of tax assessed under section 115JA. The decision was based on the precedent set by the Supreme Court, leading to the rejection of the ground of appeal.

Issue 4: Treatment of unabsorbed depreciation against capital gains and taxability under section 115JB:
The appellant disputed the AO's decision to set off the loss from unabsorbed depreciation against capital gains, arguing that section 71(2) allowed the option to pay tax on capital gains separately. However, the CIT(A) upheld the AO's decision, stating that unabsorbed depreciation should be set off against any income, including capital gains. The ITAT concurred with the revenue authorities, emphasizing the mandatory nature of the adjustment as per the Act. Consequently, the ground was rejected, and the decision of the revenue authorities was sustained.

In conclusion, the ITAT partly allowed the appeal filed by the assessee, addressing various issues related to disallowances, interest levies, and the treatment of unabsorbed depreciation against capital gains under different provisions of the Income Tax Act.