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TMI Blog2016 (7) TMI 837X X X X Extracts X X X X X X X X Extracts X X X X ..... -much as depreciation is debited to the P & L account. If not, i.e., is a negative figure, the amount of depreciation included therein is to be segregated, so that the two, the unabsorbed depreciation and the balance loss are separately known, and the lower of the two set off. If the gross loss is lower than depreciation charged to the P&L A/c (be it for one or more years preceding the current year), it implies there is no loss, other than depreciation, so that it is nil, making the provision of clause (iii) of Explanation 1 to s. 115-JB inapplicable. Notably, the provision does not employ the word “losses”. In fact, even if it did, it would only imply losses for all the preceding years, taken cumulatively, as reduced by the cumulative profit (for all these years). And, at any rate, may give rise to some doubt only in such a non-existent case. The assessee adverts to there being no concept of carry backward of losses under the in Indian tax laws, which contemplate only carry forward of losses argument, though based on a truism, is both invalid and misconceived. There is, further, nothing in the language of the provision of clause (iii) of Explanation 1 to section 115 JB that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessing Officer. 2. The learned CIT(A) erred in holding that the appellant has furnished inaccurate particulars of income in respect of excessive claim of depreciation which was not in accordance with the books of accounts maintained by the appellant as prescribed under Parts II and III of Schedule VI of the Companies Act. 3. The learned CIT(A) further erred stating that the appellant has accepted the decision and no further appeals pending on this matter and hence, it becomes an undisputed matter of furnishing inaccurate particulars of income. 4. The learned CIT(A) erred in observing that the appellant has excessively claimed depreciation knowing fully well that the helipad was never used for its business purposes in the initial year of its claim of depreciation. 3. We have heard the parties, and perused the material on record. 3.1 The relevant clause of Explanation 1 to section 115JB, where-under only the permitted adjustments to the profit (or loss) as per the profit and loss account, prepared in accordance with Part II and III of Schedule VI to the Companies Act, 1956 could be made, reads as under: Special provision for payment of tax by certain companies ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rred Tax (26.70) (76.33) Profit/(Loss) after tax 244.08 (9,404.02) Add :Provisions written back 1,556.72 0.00 Add (Less) : Excess/Short provision for Taxation of earlier years (net) 20.17 0.00 1,820.97 (9,404.02) Add: Balance in Profit Loss A/c Brought Forward 25,863.14 35,290.86 Amount Available for Appropriation 27.684.11 25,886.84 Appropriation: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8,745.63 18,745.63 Add: Amount transferred from Profit Loss Account 0.00 0.00 18,745.63 18,745.63 Balance in Profit and Loss Account 27,635.29 25,863.14 68,538.56 66,17.59 Director s Report (Rupees in crore) Year ended March 31, 2006 Year ended March 31, 2005 Profit/(Loss) before depreciation and taxation 3.26 (94.38) Less: Depreciation (0.32) 0.42 Profit/(Loss) before taxation 2.94 (94.80) Less: Provision for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds and their application. This may be done in a particular manner which may not necessarily be in the same manner as reflected in the books of account . To be more explicit, Part I of the said Schedule VI provides that the debit balance in the profit and loss account is shown as a deduction from uncommitted reserves. That, however, is only form of presentation and does not mean that the loss (represented by the debit balance in the profit and loss account) is absorbed by past reserves in the books of account. Further, the assessee has already accepted the adjustment to its returned book profit, i.e., in the quantum proceedings, and it s explanation on merits is only qua penalty proceedings, which are separate and distinct proceedings and, further, that a wrong claim for deduction would not automatically result in a liability toward penalty. What would save penalty is a plausible explanation (for the claim for deduction), coupled with disclosure of all material facts, i.e., material to the computation of income in short, a bona fide conduct. The fore-going sums up the assessee s case. 3.3 All that the law obliges the assessee, i.e., to eschew penalty, is to exhibit its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... res (or two set of figures) for the same ? Whether, therefore, one may refer to the balance-sheet or the profit and loss account, and irrespective of the manner of it s presentation of which much is made out, the same would reveal or reflect the same figure, i.e., qua a particular aspect, as for example, the loss brought forward. Why, both are supposed to reflect the position be it of the working results (for the account period) or the state of affairs (as at the end of the account period), only as per the books of account , implying their being in consistence and in agreement therewith. That is, the two (the P L A/c and the Balance Sheet), though functionally different, designed to yield different information about the reporting enterprise, are only, and only necessarily so, as per the books of account. Reference to one (profit and loss account) in preference to the other (balance-sheet), as does the assessee, is misleading . Could the books of account reveal different figures, whether one may look at the profit and loss account or the balance-sheet, both of which, termed final accounts, are drawn only from the books of account, and are to be read together. This would even ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dian tax laws, which contemplate only carry forward of losses. The argument, though based on a truism, is both invalid and misconceived. To explain, let us take illustrative figures, as of loss for the immediately preceding year at ₹ 20 (say), and of brought forward balance in the profit and loss account at a profit of ₹ 120/-, so that the balance in the profit and loss account, as per the balance-sheet as at the end of the of such year (or at the beginning of the current year) is ₹ 100/-. Going by the assessee s argument, there would be two sets of figures of profit (or loss) brought forward, i.e., profit of ₹ 120/- and a loss of ₹ 20/-, for the current year as per the books of account. Could it possibly be ? Surely not, in-as-much as both profit and loss cannot co-exist, so that the profit or loss brought forward is only the net profit of ₹ 100/-. The accounts bear only one account for the profit or loss, i.e., the Profit Loss A/c , the balance wherein, at any given point of time, reflects the profit or, as the case may be, loss, that is brought forward from one year to the next - the account being prepared annually. A loss (for a particula ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f depreciation. The lower of the two, reckoned on an absolute basis, is to be allowed set off/adjusted. It may be recalled that the language of the erstwhile section 115J allowed scope for a controversy as to how the loss/es is to be reckoned, i.e., whether inclusive or exclusive of depreciation, and which stands considered by the Apex Court in Surana Steels (P.) Ltd. v. Dy. CIT [1999] 237 ITR 777 (SC). There is reference to the decision in the case of Peico Electronics Electricals Ltd. vs. CIT [2011] 339 ITR 506 (Cal) in the assessee s written submissions (to the ld. CIT(A)). Though, in fairness, the said decision was not referred to by the ld. AR while pleading assessee s case, in-as-much as there is no reference to the said decision in the impugned order, we consider ourselves obliged to consider the same. The same stands carefully perused. The same is on a different aspect of the matter, from which therefore no support can be drawn. The issue in that case was whether it is the loss, gross of unabsorbed depreciation (Rs. 1648.74 lacs) or net of it (Rs. 261.04 lacs), that is required to be adjusted/set off for the purpose of deduction u/c (iv) of s. 115 J(1A) (correspond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovision. It has no application to a case where the provision is clear and the law is well-settled. This principle cannot be stretched too far. It cannot be used to misinterpret a statutory provision which is otherwise clear and brooks no doubt about its meaning or interpretation just to give benefit to the taxpayer which the statute did not intend to give . We may finally advert to the decision in the case of CIT vs. NG Technologies Ltd. (in ITA No. 82/2012 dated 01.12.2014), SLP against which stands since dismissed by the Hon ble Apex Court. The said decision is rendered in the context of penalty u/s. 271(1)(c) to the effect that any claim with regard to a legal stand cannot be admitted where it is prima facie incorrect or wrong. The claim should not be banal or a ruse and the penalty cannot be deleted under the guise or pretence of a legal opinion used as a smokescreen or fa ade. Allowing this will be stretching and making the requirement to prove a bona fide conduct illusionary and ineffective and would fail to check and stop fanciful and incredible claims. It is noticeable, it continued, that most of the income tax returns are accepted without scrutiny or regular ass ..... X X X X Extracts X X X X X X X X Extracts X X X X
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