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TMI Blog2014 (6) TMI 536X X X X Extracts X X X X X X X X Extracts X X X X ..... has wrongly included the amount of Provision created for interest in the Book Profit in the earlier years, even when there is no such requirement u/s 115JA / 115JB of the Act - the amount so increased does not fall in the category of “amounts increased under Explanation 1 to sec. 115JB and under Explanation below the second proviso to sec. 115JA of the Act” - the assessee is not entitled to claim for deduction for the amount of Provision for interest reversed by it and credited to the Profit and Loss account – thus, the order of the CIT(A) is set aside – Decided partly in favour of Revenue. - ITA No. 750/Coch/2013 - - - Dated:- 6-6-2014 - Shri N. R. S. Ganesan, JM And B. R. Baskaran, AM,JJ. For the Petitioner : None For the Respondent : Smt Latha V Kumar ORDER Per B. R. Baskaran, AM: The appeal filed by the revenue is directed against the order dated 7/8/2013 passed by the ld CIT(A)-II, Kochi and its relates to the AY 2006-07. None appeared on behalf of the assessee even though the case was adjourned on an earlier occasion at the request of the authorized representative of the assessee. Hence, we proceed to dispose of the appeal ex-parte without the prese ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ld CIT(A). The assessee contended before the first appellate authority that the amount relating to unabsorbed deprecation or brought forward loss whichever is less actually works out to Rs.6,44,22,982/- as against the amount of Rs.93,61,651/- deducted by the AO. The assessee also further submitted that it has credited the profit and Loss account with an amount of Rs. 4,61,18,083/- and it relates to the reversal of provision made towards interest and other charges payable on the loans taken from ICICI bank. It was submitted that the assessee duly provided for the interest payable on the bank loan every year and debited the same in the Profit and Loss account of respective years. However, for the purpose of computing income and book profit under the Income tax Act, the interest so provided was disallowed u/s 43B of the Act in the respective years, as it was not paid in that year. Subsequently, the company entered into a One time settlement of the loan taken from ICICI and as per the scheme, the assessee was not liable to pay interest amount of Rs.61.18 lacs. Hence the assessee has reversed the Provision for interest created earlier and credited the above said amount to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be any restriction on the number of years that are required to be considered for ascertaining the brought forward loss or unabsorbed depreciation. Hence, in our view the assessing officer was not right in determining the figures of brought forward loss/ unabsorbed depreciation by considering book results relating to the assessment years 1999-2000 to 2005-06 alone. We notice from the Balance sheet as on 31.3.2005 filed before us, the accumulated loss is shown under the head Profit and Loss Account and the same is grouped under the head Miscellaneous Expenditure in Assets side of Balance Sheet. The Schedule J contains details of Miscellaneous Expenditure, in which the closing balance as on 31.3.2005 relating to the Profit and Loss account is shown at Rs.28,19,60,045/-. In our view, the assessing officer is required to segregate the above said amount into Brought forward loss and Unabsorbed depreciation and adopt the lower of the two figures for the purpose of computing Book Profit u/s 115JB of the Act. According to the assessee, the lower of brought forward loss or unabsorbed depreciation is Rs.6,44,22,982/-. However we notice that the said submission of the assessee has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the extent and credited the same in the Profit and Loss account. According to the assessee, clause (i) of Explanation 1 to sec. 115JB is applicable to the above said claim. 6.1 A careful perusal of the proviso given under clause (i) of Explanation 1 to sec. 115JB, which is extracted above, would show that it is prescribing a condition for allowing deduction under clause (i), i.e., the book profit of earlier year / years should have been increased by those reserves or provisions (out of which the said amount was withdrawn) under the Explanation 1 to sec. 115JB or under the Explanation below the second proviso to section 115JA, as the case may be. In the instant case, the amount credited to the Profit and Loss account relates the amount of provision created for interest payment , which was reversed. Thus, it is not a case of withdrawal from any Reserve account. We shall consider the clauses relating to the Provisions prescribed under both the Explanations referred above. We notice that under the Explanation 1 to sec. 115JB or under the Explanation below the second proviso to section 115JA, the Net profit should be increased by the amount of amounts set aside to provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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