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TMI Blog2011 (5) TMI 657X X X X Extracts X X X X X X X X Extracts X X X X ..... epreciation, it becomes necessary to bifurcate the brought forward loss as per books of account into "Unabsorbed business loss" and "Unabsorbed depreciation" - Held that it would not be correct on the part of the Assessing Officer to apply the principles prescribed in sec. 70 - 79 of the Act for accumulated losses shown in the books of account - provisions of sec 115JA are a complete code by itself Interest u/s 220(2) - AO levied interest under this section - set aside the matter - Assessing Officer with a direction to examine the claim - Held in the favour of appellant. - ITA NO. 280(VIZAG.) OF 2010 - - - Dated:- 9-5-2011 - SUNIL KUMAR YADAV, AND B.R. BASKARAN, JJ. Appearances: G.V.N. Hari for the Appellant. R.K. Singh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the Profit and Loss account and as reduced by clauses (i) to (ix) mentioned therein. There is no dispute with regard to the method of computation. The dispute is with regard to the determination of amount to be deducted as per clause (iii) of the Explanation. The said clause reads as under: "(iii) the amount of loss brought forward or unabsorbed depreciation, whichever is less as per books of account. Explanation. For the purposes of this clause,- (a) the loss shall not include depreciation. (b) the provisions of this clause shall not apply if the amount of loss brought forward or unabsorbed depreciation is nil." The assessee was having accumulated balance of loss to the extent of Rs. 38,84,365/- as on 31.3.1999 in its book ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ser of two cumulative figures, i.e. Rs. 10,27,609/- should be presumed to have been set off against the net profits available for the assessment year 1999-2000 and thus, for the succeeding year, i.e. the year under consideration, there would be no unabsorbed depreciation making it NIL. Hence the lower of unabsorbed loss or unabsorbed depreciation being Nil, the assessee is not entitled to deduct any amount under the said clause. Accordingly, the Assessing Officer rejected the claim of deduction of Rs. 10,27,609/- in the first round of proceeding. The Learned CIT(A) also confirmed the order of Assessing Officer. The assessee carried the matter before the ITAT and contended that the unabsorbed loss as per books of account as on 31.3.99 has to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... more than 8 years old as on 31.3.2000. In this process he arrived at the unabsorbed business loss at NIL figure and the unabsorbed depreciation at Rs. 34,79,749/-. Accordingly he did not allow any deduction since lower of the two was NIL. The Assessing Officer also levied interest under section 220(2) of the Act. Aggrieved, the assessee carried the matter in appeal before Learned CIT(A), who affirmed the order of the Assessing Officer in respect of computation of book profit. However, she set aside the matter of charging of interest under section 220(2) of the Act to the file of Assessing Officer with a direction to verify the claim of the assessee. Aggrieved, the assessee is in appeal before us. 4. We have heard the rival contentions an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... djusted against business profits only. However, under the accountancy principles, there is no such restriction, i.e. the loss can be carried forward for any number of years and it can be adjusted against the income from any source also. The loss incurred in a year cannot be ignored, i.e. it is not possible to omit past loss from the books of account under double entry system of accounting. The loss can only be adjusted against any types of income earned in the succeeding years. One more option is that the loss can be adjusted against the Share capital under Capital reduction scheme. However, such capital reduction scheme is not taken cognizance of under Income tax Act. Hence there is drastic variation between the income tax provisions and a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the manner of set off or modalities of carry forward and set off of loss to be followed for book purposes. Hence sub. section (4) of sec. 115JA cannot have application for the said purpose. 9. In these circumstances, in our view, it would not be correct on the part of the Assessing Officer to apply the principles prescribed in sec. 70 - 79 of the Act for accumulated losses shown in the books of account. Accordingly, we set aside the order of Learned CIT(A) and restore the matter back to the file of Assessing Officer with a direction to compute the eligible amount of deduction under clause (iii) of Explanation to sec. 115JA after examining the method followed and the relevant computations submitted by the assessee. 10. The next issue r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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