2014 (6) TMI 536 - AT - Income Tax

Minimum Alternate Tax (MAT) - book adjustments - Deduction of lower of unabsorbed depreciation or brought forward business loss while computing the book profit u/s 115JB of the Act Held that - The provisions of sec. 115JB do not prescribe any restriction on the number of years that are required to be considered for ascertaining the brought forward loss or unabsorbed depreciation the AO is required to segregate the amount into Brought forward loss and Unabsorbed depreciation and adopt the lower of the two figures for the purpose of computing Book Profit u/s 115JB of the Act - the figure reported by the assessee needs to be verified at the end of the AO thus the matter is to be remitted back to the AO for fresh adjudication with the direction to segregate the amount of Profit and Loss account into brought forward loss and unabsorbed depreciation and allow the lower of the two figures as deduction while computing the book profit u/s 115JB of the Act Decided in favour of revenue. Deduction of Provision for interest and other charges Held that - the assessee has wrongly included the amount of Provision created for interest in the Book Profit in the earlier years, even when there is no such requirement u/s 115JA / 115JB of the Act - the amount so increased does not fall in the category of amounts increased under Explanation 1 to sec. 115JB and under Explanation below the second proviso to sec. 115JA of the Act - the assessee is not entitled to claim for deduction for the amount of Provision for interest reversed by it and credited to the Profit and Loss account thus, the order of the CIT(A) is set aside Decided partly in favour of Revenue.

Summary

Issues:
1. Deduction of lower of unabsorbed depreciation or brought forward business loss under section 115JB of the Act.
2. Claim for deduction of provision for interest and other charges reversed by the assessee under Explanation 1 to section 115JB.

Issue 1:
The appeal concerns the deduction of "lower of unabsorbed depreciation or brought forward business loss" while computing the book profit under section 115JB of the Act. The assessing officer computed this amount based on results from assessment years 1999-2000 to 2005-06, but the assessee argued for a different figure of Rs. 6,44,22,982. The tribunal found the AO's approach flawed as it did not consider losses incurred before 1999-2000. The tribunal directed the AO to segregate the accumulated loss figure and verify the assessee's claim, setting aside the CIT(A)'s decision on this issue.

Issue 2:
The second issue revolves around the claim for deduction of provision for interest and other charges reversed by the assessee under Explanation 1 to section 115JB. The assessee reversed a provision for interest after a one-time settlement scheme with a bank, arguing for deduction under clause (i) of Explanation 1. However, the tribunal noted that this provision was not an unascertained liability and did not require an increase in net profit under sections 115JA or 115JB. The tribunal disagreed with the CIT(A)'s decision to allow this deduction, setting aside his order on this issue.

In conclusion, the tribunal partly allowed the revenue's appeal, emphasizing the correct application of provisions related to deductions in the computation of book profit under section 115JB of the Income Tax Act.