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2020 (9) TMI 18 - AT - Income TaxApplicability of Sec.115JB(2), Expl.1(vii) vis- -vis BIFR orders - deduction of profit earned during the year - HELD THAT - Assessee s net worth has turned positive as on 31/03/2011. It is settled legal position that the manner of computation as provided in Sec.115JB would be complete code in itself and the computations were to be made strictly in the manner as provided therein. Explanation-1 (vii) envisages reduction of profit of sick industrial company for the assessment year commencing on and from the assessment year relevant to the previous year in which the said company has become a sick industrial company u/s 17(1) of Sick Industrial Companies (Special Provisions) Act, 1985 and ending with the assessment year during which the entire net worth of such company becomes equal to or exceeds the accumulated losses. Going by these provisions, the assessee is ineligible to claim the deduction of profit earned during the year while making computations u/s 115JB. So far as the arguments that the provisions of SICA would prevail over other statute ince the assessee was discharged by SICA on 16/08/2011 and its net worth turned positive by virtue of implementation of revival scheme, the assessee would be precluded from relief u/s 115JB in view of Explanation 1(vii) to Section 115JB (2) and therefore, no relief would be available from AY 2011-12 onwards. Therefore, the matter of applicability of Sec.115JB was delved into by CBDT and it was proposed to restrict the relief u/s 115JB as per the provisions contained therein. This being the case, the plea as raised by Ld. AR could not be accepted since the assessee s claim was specifically examined by appropriate authorities and it was decided not to extend the benefit of provisions of Sec. 115JB after assessee s net worth turned positive. Therefore, no relief could be granted to the assessee on this point. Reduction in Book Profits u/s 115JB - Amount credited to Profit Loss Account on account of waiver of loan would not partake the character of income and hence should not form part of Book Profits u/s 115JB and Adjustment in accumulated debit balance of Profit Loss Account through Restructuring Account - HELD THAT - As per the express provisions of Explanation-1(iii) to S.115JB (2), the assessee would be entitled for deduction of amount of loss brought forward or unabsorbed depreciation whichever is less as per books of account. It is also evident that the assessee has claimed lower of depreciation and book loss while computing Book Profits u/s 115JB for AY 2012-13 which has not been disturbed by Ld. AO in the assessment order for AY 2012-13. Therefore, we find certain strength in these arguments. We find that the issue of aforesaid adjustments has not been delved upon either by Ld. AO or by Ld. CIT(A). Therefore, on the facts and circumstances, we deem it fit to remit the matter back to the file of Ld.CIT(A) to specifically adjudicate the issues raised under the appeal by way of a speaking order and bring on record correct factual matrix, in this respect.
Issues Involved:
1. Exemption from Minimum Alternate Tax (MAT) 2. Non-adjudication of claims by CIT(A) 3. Reduction of Book Profit by lower of Unabsorbed Depreciation or Business Loss 4. Reduction of Book Profits by amounts credited on account of Capital Reserve and Share Premium account 5. Failure to rectify the Appellate Order u/s 154 Detailed Analysis: I. Exemption from MAT The primary issue was whether the assessee was entitled to exemption from MAT under Section 115JB as directed by the Board of Industrial and Financial Reconstruction (BIFR) during the rehabilitation period. The assessee argued that the BIFR's order dated 21.09.2010 and the provisions of the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA) entitled them to exemption from MAT for the period from 01/04/2009 to 31/03/2017. However, the DIT (Recovery) conveyed that the relief under Section 115JB would be available only until the net worth became positive, which occurred on 31/03/2011. Consequently, the relief was limited to AY 2011-12, and the assessee was not entitled to MAT exemption thereafter. The Tribunal upheld this position, noting that the BIFR's directive was to "consider" the exemption, not to mandate it, and the CBDT had decided not to extend the benefit beyond AY 2011-12. II. Non-adjudication of claims by CIT(A) The assessee claimed that the CIT(A) failed to adjudicate their claims for adjustment of Book Profit on account of amounts credited to the Profit & Loss Account via the Restructuring Account and the reduction of Book Profit by the lower of the Unabsorbed Depreciation or Business Loss. The Tribunal noted that these claims were subsequently dealt with by the CIT(A) under Section 154, leading to a separate appeal (ITA No. 4696/Mum/2019). Therefore, this ground became infructuous. III. Reduction of Book Profit by lower of Unabsorbed Depreciation or Business Loss The assessee argued that the book profit should be calculated by excluding amounts credited to the Profit & Loss Account due to the waiver of loans granted by BIFR. They contended that these amounts did not represent real profits and should not be included in the book profit calculation. The Tribunal found merit in the assessee's arguments and noted that the CIT(A) had not specifically addressed these issues. Consequently, the matter was remitted back to the CIT(A) for a detailed adjudication. IV. Reduction of Book Profits by amounts credited on account of Capital Reserve and Share Premium account The assessee also sought adjustments to the book profits for credits in the Profit & Loss Account relating to the Capital Reserve and Share Premium Accounts. The Tribunal found that the CIT(A) had not specifically dealt with these issues and directed the CIT(A) to adjudicate them upon remand. V. Failure to rectify the Appellate Order u/s 154 The assessee contended that the CIT(A) erred in rejecting their application under Section 154 to rectify the appellate order dated 05.03.2019, which had not adjudicated all grounds and issues. The Tribunal agreed that the CIT(A) had failed to address certain claims and directed a remand for a detailed adjudication. Conclusion: The appeals for AY 2013-14 and 2014-15 were partially allowed for statistical purposes, with the Tribunal directing the CIT(A) to specifically adjudicate the issues regarding the reduction of book profits by amounts credited to the Profit & Loss Account and the adjustments for Capital Reserve and Share Premium accounts. The Tribunal upheld the denial of MAT exemption beyond AY 2011-12, as decided by the CBDT and conveyed by the DIT (Recovery).
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