2014 (3) TMI 898 - AT - Income Tax

Allowability of set off of unabsorbed depreciation Calculation of book profit Held that - CIT(A) was of the view that the AO clearly allowed the set off brought forward depreciation which was originally set off by the assessee in its return as according to it only this much of book profit were available to it - Revenue accepted that the AO had calculated the book profit as per Section 115JB as per the direction of the CIT(A), which has been accepted by the assessee Decided against Revenue. Sale of scrap and disallowance of expenses Expenses relatable to export turnover Deduction u/s 10B of the Act Held that - The AO did not make any adjustment for expenses in computing 10B deduction, who has made the adjustment on account of expenditure relatable to any income to which Section 10 applies for the purpose of 115JB which has been held by the CIT(A) against the law and he had allowed the appeal for Section 115JB computation of income the ground does not exist from the order of the AO as well as order of the CIT(A) Decided against Revenue.

Summary

Issues:
1. Allowance of unabsorbed depreciation for book profit calculation.
2. Disallowance of certain expenses for deduction u/s. 10B of the IT Act.

Issue 1 - Unabsorbed Depreciation for Book Profit Calculation:
The appeal was filed by the Revenue against the CIT(A)'s order for A.Y. 2006-2007. The A.O. had computed the income u/s. 115JB by reducing the amount of brought forward losses or brought forward depreciation, whichever is less, resulting in a computed income of Rs.66,74,326/-. The CIT(A) directed the A.O. to verify the figures and correctly allow the unabsorbed depreciation from the book profit. The Revenue's appeal on this ground was dismissed as the book profit calculation was done as per the CIT(A)'s direction, which was accepted by both parties.

Issue 2 - Disallowance of Expenses for Deduction u/s. 10B:
The A.O. disallowed the claim made by the assessee for deduction u/s. 10B on interest income, sale of scrap, and packing material not related to export turnover. The CIT(A) partially allowed the appeal, upholding the disallowance of interest income but providing relief in Book Profits worked u/s. 115JB by considering expenses related to export income. The Revenue contended that the A.O. did not make any adjustment for expenses in computing the 10B deduction, which the CIT(A) held against the law. The Revenue's appeal was dismissed as the CIT(A) had correctly computed the book profits by considering the expenses related to export income.

In conclusion, the Tribunal upheld the CIT(A)'s decision, dismissing the Revenue's appeal. The Tribunal found no discrepancy in the CIT(A)'s order regarding the computation of income under Section 115JB and the disallowance of certain expenses for the deduction u/s. 10B of the IT Act.