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2020 (6) TMI 365 - AT - Income TaxMAT Computation u/s 115JB - Not allowing the adjustment of lower of the unabsorbed depreciation or business losses while calculating book profit under MAT provision - whether the financial statements prepared by the assessee are amount the books of accounts? - HELD THAT - To our mind, the financial statements i.e. balance sheet and profit and loss account are compilation of the various figures of the income and expenditure account, fixed assets, investments, sundry debtors, inventories, share capital, loans and liabilities, current liabilities etc which are prepared at the end of the accounting period for providing the information to various interested parties/stakeholders. As such, these financial statements cannot be referred as the books of accounts as alleged by the AO. In holding so, we draw support and guidance from the judgment of Hon ble Madras High Court in the case of CIT vs. Taj Borewells 2007 (4) TMI 203 - MADRAS HIGH COURT . Assessee has already suffered the tax on the accumulated profit and therefore same profit should not be made subject to tax again under the provisions of MAT. In holding so we draw support and guidance from case of CIT vs. Sumi Motherson Innovative Engg. Ltd. 2010 (10) TMI 33 - DELHI HIGH COURT . The amount of losses incurred by the assessee for the previous year s 2012-13 and 2011-12 should be set off against the future income in the manner as specified under section 115 JB of the Act. Thus we hold that the assessee has rightly reduced the amount of income for the year under consideration from the brought forward losses/unabsorbed depreciation pertaining to the previous year s 2012-13 and 2011-12. Accordingly, we are not convinced with the finding of the authorities below. Accordingly we set aside the order of the learned CIT (A) and direct the AO not to levy the tax under the provisions of MAT. Hence the ground of appeal of the assessee is allowed. Business loss and unabsorbed depreciation - Claim not be allowed to be carried forward for set off while determining the profit under the provisions of MAT - HELD THAT - At the outset we note that we have already directed to the AO to allow the set off of the brought forward losses/unabsorbed depreciation pertaining to the years 2012-13 and 2011-12 against the income of the current year - Accordingly, we direct the AO to allow the claim of the assessee against the income of the future years until and unless it is exhausted as per the provisions of law.
Issues Involved:
1. Adjustment of lower of unabsorbed depreciation and business loss while calculating book profit under MAT provisions. 2. Carry forward of business loss and unabsorbed depreciation to succeeding years. Issue 1: Adjustment of Lower of Unabsorbed Depreciation and Business Loss While Calculating Book Profit Under MAT Provisions The assessee, a private company engaged in ship breaking, reported a net profit of ?63,75,513/- in its financial statements for the relevant year. However, while computing the book profit under section 115JB of the Income Tax Act, the assessee reduced this profit by the lower of the amount of brought forward losses or unabsorbed depreciation amounting to ?1,23,04,414/-. The Assessing Officer (AO) disallowed this reduction, noting that there were no brought forward losses or unabsorbed depreciation shown in the financial statements. The AO observed that losses from previous years (2012-13 and 2011-12) had already been set off against accumulated profits from 2010-11. The CIT(A) upheld the AO's decision, stating that the entire losses for 2012-13 and 2011-12 had been set off against accumulated profits, and thus, the MAT was payable on ?63,75,513/-. The CIT(A) rejected the assessee's reliance on case laws, noting that the facts were different. The assessee contended that the AO's calculation was incorrect and that the losses and unabsorbed depreciation should be considered for set off against current profits. It was argued that the financial statements, including the balance sheet and profit and loss account, should not be equated with the term "books of account" as per the Companies Act, 2013. The assessee cited definitions from the Companies Act and case laws, particularly the judgment of the Madras High Court in CIT vs. Taj Borewells, to support their argument that financial statements are not the same as books of account. The Tribunal agreed with the assessee's argument, noting that financial statements are compilations of various figures and cannot be referred to as books of account. The Tribunal also highlighted that the accumulated profits had already suffered tax under normal computation, and taxing them again under MAT would be contrary to the purpose of MAT provisions. The Tribunal cited the Delhi High Court judgment in CIT vs. Sumi Motherson Innovative Engg. Ltd., which emphasized that losses brought forward should be considered for set off against current profits. The Tribunal concluded that the assessee had rightly reduced the amount of income for the year under consideration from the brought forward losses/unabsorbed depreciation pertaining to previous years 2012-13 and 2011-12. The Tribunal set aside the CIT(A)'s order and directed the AO not to levy tax under MAT provisions. Issue 2: Carry Forward of Business Loss and Unabsorbed Depreciation to Succeeding Years The assessee argued that the AO did not mention the carry forward of undisputed business loss and unabsorbed depreciation to succeeding years in the assessment order. The CIT(A) misunderstood the ground, dismissing it by referring to the AO's findings on MAT calculation. The Tribunal noted that it had already directed the AO to allow the set off of brought forward losses/unabsorbed depreciation against the current year's income. Consequently, the Tribunal directed the AO to allow the carry forward of these losses and unabsorbed depreciation to future years until exhausted as per the provisions of law. Conclusion: The Tribunal allowed the appeal of the assessee, directing the AO to: 1. Not levy tax under MAT provisions after considering the set off of brought forward losses/unabsorbed depreciation. 2. Allow the carry forward of business loss and unabsorbed depreciation to succeeding years as per the law. Order pronounced in the Court on 04/03/2020 at Ahmedabad.
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