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TMI Blog2010 (3) TMI 931X X X X Extracts X X X X X X X X Extracts X X X X ..... the book profit for the assessment year 2002-03. The unabsorbed book depreciation brought forward to the assessment year 2002-03 is as under : Unabsorbed depreciation already set off Rs. 27,71,74,222 Less : Unabsorbed depreciation set off for the assessment year 2001-02 Rs. 14,72,79,975 Rs. 12,98,94,247 The taxable book profit after adjustment of available unabsorbed depreciation of Rs. 12,98,94,247 is Rs. 8,22,90,603 for the assessment year 2002-03 as under : Book profit Rs. 21,21,84,850 Less : Available unabsorbed depreciation or brought forward book loss (Rs. 35,29,21,966 whichever is less) Rs. 12,98,94,247 Rs. 8,22,90,603 The assessee s claim of set-off of Rs. 27,71,74,222 as unabsorbed book depreciation in the assessment year 2002-03 for computing book profits, instead of Rs. 12,98,94,247 and the allowance of the same in the order under section 143(3) passed on March 18, 2005 appears to be erroneous and prejudicial to the interests of the Revenue calling for an action under section 263 of the Income-tax Act. The assessee replied as under : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he only basis for reckoning the amount to be set off against the profits for working out books profits under section 115JB. (6) Furthermore, section 115JB mandates that the other provisions would apply, excepting to the extent provided by section 115JB(1). It would, therefore, follow that the priority of set-off as prescribed under section 72 would apply, pursuant to which the unabsorbed business loss will have priority over set of depreciation for the purpose of determining the extent of unabsorbed depreciation and unabsorbed business loss computed as per books of account. It is also to be noted that the Companies Act, 1956 does not require determination of unabsorbed business loss and depreciation separately. Only when depreciation is not provided for in the accounts as a debit to the profit and loss account, the same is required to be disclosed. (7) It would therefore follow that the method adopted by the assessee has the sanction of section 115JB(2) itself and there is no other method provided expressly to section 115JB or other provisions of the Act. Accordingly, the computation made by the assessee is consistent with the law on the subject and it is not required to be int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es that for the purpose of section 115J, book profit means the net profit as shown in the profit and loss account for the relevant previous year and as reduced by the items specified in clauses (i) to (iv). Under section 205 of the Companies Act, this methodology was prescribed so that dividend distribution did not erode the capital of the company and the concept was incorporated in section 115J of the Income-tax Act for the same purpose, i.e., the payment of minimum alternate tax would not adversely affect the capital under the deeming provision. Subclause (iii) of both section 115JA and section 115JB left no room for doubt that the expression loss brought forward does not include depreciation and the net profit of the current year is to be reduced by the lesser of the two and the provisions of clause (iii) should not apply if the amount of loss brought forward or unabsorbed depreciation was reduced to nil. Computation under section 115JB of the Income-tax Act, as far as the figures of book loss or book depreciation brought forward from an earlier year or earlier years are concerned must start with the figures of similar computation made under section 115JB in the immediatel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the records were received on transfer. The Assessing Officer took only the figures as contained in Form No. 29B filed for the impugned assessment year, which as demonstrated above in a tabular form, was different from the one filed for the earlier assessment year with regard to brought forward depreciation. Therefore, I submit that the assessee s contention that the Assessing Officer has passed the order correctly after due application of mind, cannot be accepted. The Madras High court in the case of CIT v. Seshasayee Paper Boards Ltd. [1996] 217 ITR 358 held that the Commissioner was within his right to resort to proceedings under section 263 to keep an issue alive even in a case where the High Court had passed an order against the Revenue but appeal has been filed before the Supreme Court. Referring to this decision the Supreme Court in the case of CIT v. G. M. Mittal Stainless Steel P. Ltd. [2003] 263 ITR 255 observed that in circumstances when an issue is on appeal before the Supreme court the High Court was of the view, and correctly so, that the Commissioner could have initiated proceedings under section 263 . On this particular issue, the action initiated under section 263 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... extent provided by section 115JB(1). It would, therefore, follow that the priority of set-off as prescribed under section 72 would apply, pursuant to which the unabsorbed business loss will have priority over set-off depreciation for the purpose of determining the extent of unabsorbed depreciation and unabsorbed business loss computed as per books of account. It is also to be noted that the Companies Act, 1956 does not require determination of unabsorbed business loss and depreciation separately. Only when depreciation is not provided for in the accounts as a debit to the profit and loss account, the same is required to be disclosed. (x) The learned Commissioner of Income-tax ought to have noted that issues involving controversial matters of interpretation cannot be the subject of proceedings under section 263 as an order accepting an interpretation in preference to another one could not be regarded as plainly erroneous. We have considered the rival submissions and the material available on record. We have found that the learned Commissioner of Income-tax has not found any error in the assessment order. The assessment order is neither erroneous nor prejudicial to the interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Income-tax under section 263 may be summarised below : (i) The Commissioner of Income-tax must record satisfaction that the order of the Assessing Officer is erroneous and prejudicial to the interests of the Revenue. Both the conditions must be fulfilled. (ii) Section 263 cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer and it is only when an order is erroneous, that the section will be attracted. (iii) An incorrect assumption of facts or an incorrect application of law will suffice for the requirement or order being erroneous. (iv) If the order is passed without application of mind, such order will fall under the category of erroneous order. (v) Every loss of revenue cannot be treated as prejudicial to the interests of the Revenue and if the Assessing Officer has adopted one of the courses permissible under law or where two views are possible and the Assessing Officer has taken one view under with which the Commissioner of Income-tax does not agree, it cannot be treated as an erroneous order, unless the view taken by the Assessing Officer is unsustainable under the law. (vi) If while making the assessment, the A ..... X X X X Extracts X X X X X X X X Extracts X X X X
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