2016 (10) TMI 540 - AT - Income Tax

MAT applicability - book profit - computation of tax liability under section MAT - deduction for unabsorbed depreciation of earlier years while computing the book profit for the Assessment Year 2008-09 disallowed - Held that - We find that the Assessing Officer in the assessment order has observed that profit as per profit & loss account was ₹ 1,59,28,201/-. According to the Assessing Officer as per his letter dated 28/07/2016, as per provision of clause (iii) of Explanation-1 to section 115JB, no business loss or unabsorbed depreciation is to be reduced from net profit to arrive at book profit for Assessment Years other than 2003-04, which already been adjusted at ₹ 71,12,338/-. Therefore, he reduced ₹71,12,338/- from ₹ 1,5928,201/- and arrived at book profit of ₹88,15,863/-. Thereafter, the Assessing Officer stated that from Assessment Year 2004-05 to 2008-09, Explanation (b) to clause (iii) comes into picture and according to which the loss shall not include depreciation and that the provisions of this clause shall not apply if either the amount of loss brought forward or unabsorbed depreciation is NIL. Therefore, he did not allow any deduction for unabsorbed depreciation of earlier years while computing the book profit for the Assessment Year 2008-09. From the reading of the explanations before amendment and after amendment goes to show that if either the loss brought forward or unabsorbed depreciation is nil, then the assessee is not allowable any deduction under this clause for computing the book profit under section 115JB. Hence, we find no infirmity in the orders of the lower authorities. Accordingly the order of the Commissioner of Income Tax (Appeals) is confirmed and the ground of appeal of the assessee is dismissed.

Summary

Issues:
1. Calculation of tax liability under section 115JB of the Income Tax Act.
2. Allowance of brought forward losses for MAT purpose.
3. Compliance with procedural requirements during assessment proceedings.
4. Interpretation of provisions of section 115JB, Explanation 1, clause (iii) before and after amendment.

Analysis:

Issue 1: Calculation of tax liability under section 115JB
The High Court observed that the Tribunal's order lacked specific mention of the calculation method under Section 115JB(2) of the Income Tax Act. Consequently, the High Court quashed the Tribunal's order and remanded the matter for re-examination solely on this limited aspect. The Assessing Officer computed the tax liability under Minimum Alternate Tax (MAT) based on the book profit of the assessee, which was challenged by the appellant.

Issue 2: Allowance of brought forward losses for MAT purpose
The appellant contended that the Assessing Officer disallowed the claim of &8377;1,59,28,201/- as brought forward losses for MAT purposes under section 115JB(2)(iii) without proper consideration. The appellant argued that the AO failed to provide requested details and did not follow principles of natural justice during the assessment proceedings. However, the Commissioner of Income Tax (Appeals) upheld the AO's action, stating that the appellant failed to point out any errors in the computation done by the AO.

Issue 3: Compliance with procedural requirements
The appellant challenged the reopening of the assessment under section 147, alleging technical grounds. The Commissioner dismissed these challenges, stating that the AO correctly followed the procedures for reopening the case. The appellant's contentions regarding the reopening of assessment were dismissed, and the AO's computation of MAT liability and total income under normal provisions of the Act was confirmed.

Issue 4: Interpretation of provisions of section 115JB, Explanation 1, clause (iii)
The Assessing Officer, based on the provisions of section 115JB, Explanation 1, clause (iii), adjusted the brought forward losses and unabsorbed depreciation to arrive at the book profit for the relevant assessment year. The AO clarified that for years other than 2003-04, losses or unabsorbed depreciation should not be reduced from net profit to determine book profit. The Tribunal upheld the AO's interpretation of the provisions, confirming the Commissioner's order and dismissing the appellant's ground of appeal.

In conclusion, the Tribunal affirmed the lower authorities' orders, finding no infirmity in the computation of tax liability under section 115JB and the treatment of brought forward losses for MAT purposes. The appeal of the assessee was dismissed, and the order was pronounced in court on the specified date.