2019 (2) TMI 1284 - HC - Income Tax

Unabsorbed depreciation/business loss - MAT computation - HELD THAT - The assessee has raised a question on this in the present appeal only because the remand report of the AO had specifically indicated the facts. In any event, the last fact finding authority, the Tribunal, having remanded the matter, holding the issue in favour of the assessee, and there is no appeal by the Revenue; we would not interfere such consideration by the AO in accordance with the order of the Tribunal. There is no question of law arising from the aforesaid issue. Provision for interest in a Bank loan made for the earlier years being permissible as a deduction under Explanation 1(i) to Section 115JB(2)- HELD THAT - As noticed that the assessee s specific claim was that though the interest was shown as a provision in the earlier years, the same was disallowed under Section 43B. It is also contended that in computation of the MAT under Section 115JB, this amount was added back as an unascertained liability in the earlier years. The assessee had been communicating with the Bank as to a One Time Settlement OTS during the said period. Eventually in the previous year relevant to the subject year, 2006-07, the matter was settled with the Bank. The entire interest was waived by the Bank and also a portion of the principal. The interest so debited to the profit and loss account for the earlier years was, hence, debited from the reserve and credited to the profit and loss account for the subject year. The same had to be deducted under Explanation (i) to Section 115JB(2). The Tribunal found that the interest is an unascertained liability and ought not to have been disallowed in the earlier years. When the AO as per the remand report at Annexure-C specifically states that it is disallowed under Section 43B, it was not proper for the Tribunal to have taken such a view. GOI (Taxes) also argues that as of now it is not clear as to whether the same was added back under Section 115JB. The earlier issue having been remanded, it is only proper that the AO considers this issue also looking at the facts. We make it clear that the question of law raised as to whether the same was unascertained liability or ascertained liability is answered in favour of the assessee; if the same has been disallowed under Section 43B as an unascertained liability in the earlier years.

Summary

Issues Involved:
1. Unabsorbed depreciation/business loss deduction under Section 115JB of the Income Tax Act, 1961.
2. Provision for interest in a Bank loan as a deduction under Explanation 1(i) to Section 115JB(2).

Issue 1: Unabsorbed Depreciation/Business Loss Deduction
The appeal pertains to the order of the Income Tax Appellate Tribunal (the Tribunal) for the assessment year 2006-07. The primary issue is the deduction of unabsorbed depreciation/business loss under Section 115JB of the Income Tax Act, 1961. The Tribunal held that the deduction should be from the books of accounts without any restriction as provided under Section 115JB. The matter was remanded to the Assessing Officer (AO) for further consideration. The Tribunal's decision favored the assessee, and as there was no appeal by the Revenue, the Court declined to interfere with the Tribunal's decision. It was concluded that no question of law arose from this issue.

Issue 2: Provision for Interest in Bank Loan
The second issue revolves around the provision for interest in a Bank loan as a deduction under Explanation 1(i) to Section 115JB(2). The assessee claimed that the interest, which was earlier disallowed under Section 43B, should be deducted under the said provision. The interest, which was debited from the reserve and credited to the profit and loss account for the subject year, was waived by the Bank along with a portion of the principal. The Tribunal found that the interest was an unascertained liability and should not have been disallowed in earlier years under Section 43B. However, the Tribunal's decision was questioned as it was unclear whether the interest was added back under Section 115JB. The Court held that if the interest was disallowed under Section 43B as an unascertained liability in earlier years, it should be treated as an ascertained liability in favor of the assessee. The Court partly allowed the appeal and remanded the issues for further consideration by the AO based on the Tribunal's findings and the Court's decision.

In conclusion, the judgment addressed the issues of unabsorbed depreciation/business loss deduction and the provision for interest in a Bank loan under Section 115JB of the Income Tax Act, 1961. The Court provided detailed analysis and guidance on these matters, ultimately remanding the issues for further consideration by the Assessing Officer.