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2018 (11) TMI 592 - AT - Income TaxMAT computation - adjustment of brought forward loss - whether the book profit figure adopted by the Ld.A.O for the purpose of application of provision of Section 115JB of the Act is correct? - Held that - Book profit as mentioned in the Provision 115JB refers to the profit before taxes which is arrived at S.No. IX of the above referred statement of profit and loss account. The format of the Profit & Loss Account in the case of the assessee as placed on record before us deviates from the standardized format of statement of profit and loss as per Schedule-VI of 1956 at some places. In normal parlance such sundry balance written off which the assessee has itself accepted to be an income forming part of the head Income whereas in audited balance sheet the adjustment has been made from the amount available for appropriation. In such situation there needs proper verification at the end of the Assessing Officer who shall verify/ examine the audited balance sheet of the assessee vis- -vis Part-II of Form of statement of Profit & Loss Schedule-VI of the Companies Act, 1956. He should also procure certificate from the auditor of the company that whether the adjustment of sundry balance written off is as per Schedule-VI of the Companies Act, 1956 and the book profit in the computation of income is as per Schedule-VI of the Companies Act, 1956. A.O should also get the audited balance sheet verified from the office of the Registrar of Companies under whose jurisdiction assessee company falls so as to get it confirmed that the audited balance sheet produced before the Tribunal is as per Schedule-VI of the Companies Act, 1956. In case a positive reply is received in favour of the assessee, A.O should decide accordingly as per law. Needless to mention that reasonable opportunity of being heard should be provided to the assessee. - Decided in favour of assessee for statistical purposes. Carry forward losses & unabsorbed depreciation - Held that - In the return for the year under consideration the appellant company had set off brought forward losses and depreciation to the tune of ₹ 74,62,470/-. The set off of unabsorbed depreciation is regulated by provision of Section 32(2) of the Act subject to the provision of sub-section 72(2) of Section 73(3). It is also evident from the perusal of assessment record that AO has not given any specific finding for denying the set off of unabsorbed loss and unabsorbed depreciation. We, therefore set aside the issues raised by revenue to the file of A.O for afresh adjudication in the light of provision of law as applicable in the instant issue i.e. Section 32(2) read with respect to 72(2).
Issues Involved:
1. Disallowance of selling and administrative expenses. 2. Computation of book profit under Section 115JB of the Income Tax Act. 3. Set-off of brought forward losses and unabsorbed depreciation. Detailed Analysis: 1. Disallowance of Selling and Administrative Expenses: The assessee initially contested the disallowance of ?5,00,000/- made by the Assessing Officer (A.O.) out of selling and administrative expenses on an ad hoc basis. However, during the proceedings, the assessee chose not to press this ground. Consequently, the Tribunal upheld the finding of the Commissioner of Income Tax (Appeals) [CIT(A)] confirming the disallowance. Thus, the ground was dismissed. 2. Computation of Book Profit under Section 115JB: The primary issue here was whether the book profit figure adopted by the A.O. for the purpose of Section 115JB was correct. The A.O. had added the sundry balance written off (?2,57,30,466/-) to the book profit, which the assessee contended was incorrect. The assessee argued that these were unsecured loans not payable and should not form part of the book profit. The Tribunal referred to several judgments, including the Supreme Court's decision in Apollo Tyres Vs CIT, which emphasized that the A.O. has limited power to alter the net profit shown in the profit and loss account except as provided in the explanation to Section 115J of the Act. The Tribunal noted that the format of the assessee's profit and loss account deviated from the standardized format as per Schedule VI of the Companies Act, 1956. It directed the A.O. to verify whether the audited balance sheet was prepared in accordance with Schedule VI and to obtain a certificate from the auditor confirming this. The A.O. was also instructed to verify the audited balance sheet with the Registrar of Companies. If the balance sheet was found compliant, the A.O. should decide accordingly. Hence, this ground was allowed for statistical purposes. 3. Set-off of Brought Forward Losses and Unabsorbed Depreciation: The Revenue contested the CIT(A)'s decision allowing the carry forward of losses and unabsorbed depreciation claimed by the assessee for the Assessment Year 2008-09. The Tribunal observed that the CIT(A) had already directed the A.O. to verify the claim. The Tribunal found no specific denial of the set-off by the A.O. in the assessment record. Therefore, it directed the A.O. to re-examine the claim in light of the relevant provisions of the Income Tax Act, specifically Section 32(2) read with Section 72(2). The A.O. was instructed to verify the details of brought forward business loss and unabsorbed depreciation after reviewing the relevant income tax returns. This ground was also allowed for statistical purposes. Conclusion: - The appeal of the assessee was partly allowed for statistical purposes. - The appeal of the Revenue was allowed for statistical purposes. The order was pronounced in the open Court on 06.11.2018.
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