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TMI Blog2011 (7) TMI 1235X X X X Extracts X X X X X X X X Extracts X X X X ..... material has been brought on record that such loss was set off against any profit of the subsequent year in determining the book profit of the assessee company after the year in which such loss was suffered. Thus, in our considered opinion, such loss was available for set off during the year under consideration for determining the book profit as per provisions of clause (iii) of section 115JB(2). In view of the above, in our considered opinion, there was no error in the order of the assessment as passed by the Assessing Officer. Our above view also finds support from the decision of the Hon'ble Delhi High Court in the case of CIT VERSUS SUMI MOTHERSON INNOVATIVE ENGINEERING LTD. [ 2010 (10) TMI 33 - DELHI HIGH COURT] . - I.T.A. No. 797/Mds/2010 - - - Dated:- 28-7-2011 - Shri N.S. Saini, AM and Shri George Mathan, J.M. For the Appellant : Shri D. Anand, Advocate For the Respondent : Shri Anirudh Rai, CIT, DR O R D E R Per N.S. SAINI, A.M :- This appeal filed by the assessee is directed against the order passed by the CIT, Chennai-III dated 12.03.2010 u/s 263 of the Income-tax Act, 1961 [in short, the Act] for Assessment Year 2005- 06. 2. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 005 declaring total income of Rs. NIL. The case was selected for scrutiny. We submitted the details required by the Assessing Officer from time to time. During the assessment proceedings, the Assessing Officer asked about the applicability of Section 1151B. We had given the details and explanation. After considering the details and explanation, the Assessing Officer completed the assessment without making any addition. You have mentioned in your notice that it is seen from the Balance Sheet as at 31.03.2005 forming part of printed accounts annexed to the return of income that there was no business loss/depreciation as per the books of accounts' and accordingly the company has to pay Minimum Alternate Tax u/s 115 JB. In this regard we would like to submit as follows: 1. The company had incurred business loss and depreciation loss between Financial Year 2000-2001 2002-03 as per the details given below : F.Y. Business loss Unabsorbed depreciation Total 2000-01 6,516,294 5,038,745 11,555,039 2001-02 8,6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scuss the manner and the purpose in which the said earlier business loss/depreciation had been adjusted by the assessee in the earlier years against its capital asset. What important here at this point is that as per assessee's audited books of accounts, there are no brought forward business losses/depreciation of earlier years which could have been adjusted while computing the book profits of the current year. The law does not permit adjustment of the book profits under any circumstance except under the exceptions given u/s 115 JB of the Income Tax Act, 1961. Therefore, all the contentions of the assessee are hereby rejected. 4. Keeping in view the above discussion, it is herby held that the assessment order made by the Assessing Officer with respect to determination of book profit u/s 115 JB after adjustment of brought forward depreciation/losses to be Nil was erroneous and prejudicial to the interest of Revenue. The net profit of the assessee for current year was admittedly ₹ 1,17,38,47/-. There is no brought forward business loss/depreciation available with the assessee to set off against the said book profits. Therefore, the said order of the Assessing Officer is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d out of which in the first year the entire loss was on account of depreciation, and in the remaining three years, there was also loss more than depreciation, i.e., cash loss. In spite of the above, to say that there was no brought forward loss or unabsorbed depreciation as per books in the current year is, in our considered opinion, an absurdity. It seems that the ld. CIT is of the opinion that unless there is a debit balance in the profit and loss account, the assessee cannot be allowed the benefit of clause (iii) Explanation to Section 115JB(2). In our considered view, the phrase loss brought forward and phrase debit balance in profit and loss account are two different and does not convey the same meaning. The above position becomes evident when one looks into the example given by the CBDT in its Circular No. 495 dated 22.9.1987. A reading of para 36.3 and 36.5 thereof shows that by virtue of the said clause, brought forward losses or unabsorbed depreciation , whichever is less, could be reduced in arriving at books profits. It requires working out separate amount of losses and unabsorbed depreciation in each year from the books of account and their set off, if any, again ..... X X X X Extracts X X X X X X X X Extracts X X X X
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