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TMI Blog2012 (1) TMI 228X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Commissioner of Income-tax (Appeals) and restoring the issue to the file of the Assessing Officer with certain directions. The learned Departmental Representative did not dispute this factsituation. 3. After considering the submissions of rival parties, we find that this issue stands concluded in favour of the assessee by decided the issue by setting aside the order of the Commissioner of Income-tax (Appeals) and restoring the issue to the file of the Assessing Officer with certain directions. The following findings of the Tribunal are relevant and are reproduced hereinbelow: 14 We have carefully considered the rival submissions. The sum and substance of the dispute relates to the manner of computation of book profits for the purposes of determining tax liability under section 115JB of the Act. Explanation 1 below 115JB(2) of the Act prescribes the adjustments required to be made to the amount of net profit as shown in the Profit Loss Account of the relevant previous year, for the purposes of computing book profit. The pertinent dispute relates to clause (iii) of the Explanation thereto, which read as under: (iii) the amount of loss brought forward or unabso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1-02 5,74,86,634 11,84,38,447 2002-03 2,97,02,890 2002-03 20,38,22,257 2003-04 31,71,55,566 65,25,98,260 81,43,70,815 66,85,72,522 16. Therefore, the total carried forward deficit was ₹ 83,03.45.077/-. This deficit comprises of business loss and/or unabsorbed depreciation which is relevant for the purposes of clause (iii) of Explanation 1 to section 115JB(2) of the Act. The set-off of the losses and depreciation pertaining to financial years 1996-97 to 2001-02 against the available profits of other years was done by the assessee in the following manner: Financial Year Business Loss Unabsorbed Depreciation Total losses 1996-97 8,44,03,032 8,97,39,166 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom the aforesaid tabulations, the total deficit of ₹ 83,03,45,077/- was comprising of a business loss of ₹ 47,31,16,210/- and unabsorbed depreciation of ₹ 35,72,28,867/-. The amount of unabsorbed depreciation being lower of the two at ₹ 35,72,28,867/- was considered by the assessee as an adjustment against the net profit permissible in terms of clause (iii) of Explanation 1 below 115J B(2) of the Act. 18. The Assessing Officer, on the other hand, observed that the unabsorbed depreciation as on 1.4.2003 of ₹ 66,85,72,522/- is to be adjusted against the aggregate profits of 10,19,17,557/- for the financial years 1994-95 and 1995-96. Thus, as per him, the unabsorbed depreciation brought forward for AY 2003-04 was only ₹ 56,66,54,975/- Thereafter, the Assessing Officer applied clause (iii) of Explanation 1 for the assessment year 2003-04 to the instant year, i. e. assessment year 2005-06 in the following manner.: For A.Y. 2003-04 Net Profits to the audited Profit Loss A/c. (as per para 3.9 above) ₹ 23,35,25,147/- Less: i) B/f. business loss of ₹ 81,43,7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted in the account books which comprises of business losses and depreciation is required to be split up for the purposes of clause (iii) of Explanation 1 to section 115JB(2). So, however, the manner of determining the individual figures of loss and depreciation is not indicated in section 115JB inasmuch as the manner in which the losses and depreciation are set off against the profits has not been spelt out. However, an indication which is manifested in section 115JB itself is a safe premise to follow in such a situation. Clause (iii) speaks of adjustment for the lower of brought forward loss or unabsorbed depreciation. Therefore, the Legislature envisaged that while computing book profits for 115JB, reduction be allowed for the lower of carried forward losses or unabsorbed depreciation of the past years. Therefore, the determination of such losses or depreciation in the past years be also made on similar proposition, in the absence of any specific provision in the Statute. Even in the past years, the losses and depreciation to be carried forward be determined on the similar principles, i.e. after setting off of the lower of depreciation or losses. Apart from the fact that there is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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