9911796707
TMI Blog2007 (3) TMI 435X X X X Extracts X X X X X X X X Extracts X X X X ..... e provisions of section 115JA. He further submitted that the assessee has reduced Rs. 42,53,591 from the book profit as per the provisions of section 115JA(2)( iii ) of the Act. It is further argued that the book profit is to be computed as per the provisions of the Companies Act, more particularly the profit and loss account is to be prepared as per the provisions of Part-II and Part-III of the Schedule-VI to the Companies Act, 1956. It is submitted that as per clause ( iii ) to section 115JA, the amount of loss brought forward or unabsorbed depreciation whichever is less as per books of account is to be reduced. He further argued that subsequently Explanation to clause ( iii ) was added which may be with a view to get over the judgment of the Hon ble Supreme Court in the case of Apollo Tyres Ltd. v. CIT [2002] 255 ITR 273 1 as in that case, the Hon ble Supreme Court held that the loss for commercial purposes, and accountancy parlance will include depreciation. It is further argued that in assessee s case there are profits as per books of account for the financial years 1995-96 and 1996-97, but there are losses including depreciation carried forward from the financial year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lly considered the facts as per material placed before us. We have also carefully considered the principles laid down in the precedent relied on by the ld. senior counsel. The controversy before us is in respect of the computation of the book profit. Section 115JA is brought on the statute book by the Finance (No. 2) Act of 1996 with effect from 1-4-1997. The main legislative intent in bringing section 115JA on the statute book has been explained by the CBDT in Circular No. 762 dated 6-2-1998. The concept of Minimum Alternative Tax (MAT) was introduced earlier also when section 115J was on the statute book. The main legislative object under section 115JA as explained by the CBDT in the said Circular is that the number of zero tax companies and companies paying marginal tax have grown. In the study it was revealed that in spite of the fact that companies have substantial book profit and were paying handsome dividend, no tax was paid by them to the exchequer. Section 115JA is the replica of the earlier section 115J with certain modifications. As per the provisions of section 115JA(2) specific method or procedure of computation of book profit is given. It is indeed clear from the prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rds "books of account". It means that the books of account on the basis of which as provided in sub-section (2) of section 115JA profit and loss account is prepared. There is no dispute that the method as well as rate of depreciation may differ under the Companies Act as well as under the Income-tax Act. 8. In this case, as per the paper book filed by the assessee, it seen that the assessee company is consistently incurring loss from the assessment year 1986-87 till assessment year 1995-96. The assessee has also filed the copies of the audited statement of accounts for the financial years 1994-95, 1995-96 and 1996-97. On the perusal of the profit and loss account as well as balance sheet, it is seen that the assessee is independently working out the profit before depreciation and net profit after providing the depreciation. It is true that under the Companies Act, no specific definition is given in respect of the losses and depreciation. The reason given for disallowing the claim of the assessee by the CIT (Appeals) is that the assessee has not clearly mentioned about the unabsorbed depreciation and brought forward losses in the annual report itself, nor claimed the deduction. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proper interpretation would be to take into consideration the respective provisions of the Companies Act only. When the net profit is determined under the normal provisions of the Act, the Legislature has separately considered the treatment and priority to be given to brought forward loss and depreciation by incorporating sub-section (3) to section 115JA. 10. We would like to refer to the Circular of the CBDT No. 495 dated 22-9-1987 reported at (1987) 168 ITR (St.) 87 (page 111) paragraph 36.5 wherein considering the earlier provisions of section 115J, the CBDT has clarified how priority should be given for deducting the brought forward loss and depreciation. Though the said Circular was issued in the context of section 115J, in our opinion, as section 115J is analogous to section 115JA, the same should be relied on for determining the method in respect of priority of the brought forward loss or depreciation. In the said circular method and priority in respect of brought forward loss and depreciation are shown with example which is as under :- "36.5 The following examples illustrate how the amended provisions relating to the new section will be applied :- NEW COMPANIES ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 115J Rs. Profit before depreciation Rs. 10,00,000 Less : Book depreciation 2,00,000 8,00,000 Less : Deduction under section 205(2) 2,00,000 6,00,000 Out of the amount whichever is less : 1984: Business loss 3,00,000 1986: Business loss 10,00,000 Total loss 13,00,000 1986 : Depreciation 2,00,000 Assessable income 30 per cent of Rs. 6 lakhs, i.e., Rs. 1.8 lakhs Amount to be carried forward as per sub-section (2) of section 115J. 1984 : Unabsorbed depreciation 3,80,000 1986 : Business loss 8,00,000 Unabsorbed depreciation 4,00,000" 11. In our opinion, though the assessee-company has not separately shown the depreciation in the balance sheet, but at the same time, accumulated loss brought forward by the assessee is comprised of the element of depreciation also, it should not be a bar for the assessee-company to claim the deduction under clause ( iii ) to section 115JA(2) of the Act. This view is further supported as clause ( ii ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
