2014 (1) TMI 867 - AT - Income Tax

Treatment of Unabsorbed depreciation u/s 115JB(2) of the Act Held that - The Assessing Officer has categorically stated in his assessment order that the assessee has already claimed un-absorbed depreciation in the earlier AY and the same was allowed - The AR has not been able to controvert the categoric finding of Assessing Officer or give any plausible reason as to why un-absorbed depreciation was carried forward year after year despite the fact that the assessee has been filing return of income under MAT provisions for the earlier AYs - If un-absorbed depreciation has already been allowed in the earlier AYs, the unabsorbed depreciation in the subsequent AYs would be NIL as no amount of depreciation for the AY 2000-01 to 2005-06 is added in the figure of unabsorbed depreciation being carried forward from AY. 1999-2000 onwards thus, the amount which could have been deducted in accordance with the provisions of Clause (iii) of Explanation 1 to Section 115JB is un- absorbed depreciation or un-absorbed business loss which ever is less, the amount of depreciation being less i.e., NIL is deductible for arriving at book profits for the AY. 2005-06 - the treatment given by the AO to unabsorbed depreciation while determining book profits u/s 115JB for the AY. 2005-06 accepted Decided against Assessee.

Summary

Issues:
Delay in filing appeal, Condonation of delay, MAT provisions, Unabsorbed depreciation, Book profits under Section 115JB, Assessment order, Appeal before CIT(A), Second appeal before Tribunal, Principle of reducing brought forward loss or unabsorbed depreciation, Dismissal of appeal.

Delay in filing appeal & Condonation of delay:
The appellant filed an appeal against the CIT(A) order with a delay of 170 days, citing reasons related to the voluntary retirement of an employee and turbulent economic conditions in the aluminium industry. The Tribunal, after hearing the submissions, condoned the delay, deeming it unintentional and in the interest of justice and equity. The appeal was admitted for further proceedings.

MAT provisions & Unabsorbed depreciation:
The appellant, a manufacturer of aluminium products, filed its return for AY 2005-06 declaring income as 'NIL' under regular computation. The Assessing Officer added back unabsorbed depreciation while computing book profits under Section 115JB, stating that the appellant had already claimed it in AY 2001-02. The appellant contended that as per Clause (iii) of Explanation 1 to Section 115JB(2), unabsorbed depreciation should be deducted while computing book profits. However, the Tribunal found that the appellant had been carrying forward unabsorbed depreciation from previous years without justification, leading to the dismissal of the appeal.

Assessment order & Appeal before CIT(A):
The Assessing Officer's final assessment order included additions/disallowances, particularly on unabsorbed depreciation, leading the appellant to appeal before the CIT(A). The CIT(A), based on earlier Tribunal orders, remitted the matter back to the Assessing Officer for re-examination. Dissatisfied with the CIT(A)'s decision, the appellant approached the Tribunal for a second appeal.

Principle of reducing brought forward loss or unabsorbed depreciation:
The Tribunal analyzed the appellant's history of carrying forward unabsorbed depreciation, noting discrepancies in the treatment of unabsorbed depreciation in successive years. Despite the appellant's arguments, the Tribunal upheld the Assessing Officer's decision to disallow unabsorbed depreciation for AY 2005-06, as it had already been claimed in prior years. The appeal was dismissed for lack of merit based on this analysis.

Dismissal of appeal:
After reviewing submissions and orders, the Tribunal concluded that the appellant's appeal lacked merit due to the improper treatment of unabsorbed depreciation in previous years. The Tribunal upheld the Assessing Officer's decision and dismissed the appeal, pronouncing the order on June 25, 2013, at Chennai.

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