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TMI Blog2018 (7) TMI 1724X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee is therefore decided in negative on principle. Assessee has simultaneously pointed out certain factual errors such as quantum of carry forward loss of ₹ 3,00,78,787/- as on 01.04.2010 as per the method adopted by the AO as against the loss at ₹ 2,12,22,430/- as per the books of accounts of the assessee. We do not propose to go into arithmetical accuracy of quantum of carry forward and restrict ourselves to adjudicate the issue on the first principles. The factual aspects are thus remanded back to the file of the AO for determination of quantification of set off as per the aforesaid principle after giving proper opportunity to the assessee in this regard. Therefore, the issue is remanded back to the file of the AO for limited purposes of applying the principles narrated above and for re-determination of quantum of unabsorbed loss/depreciation available for set off in current year and succeeding year. - Decided against assessee - I.T.A. No. 209/Ahd/2018 - - - Dated:- 26-7-2018 - SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER AND SMT. MADHUMITA ROY, JUDICIAL MEMBER For The Appellant : Shri Saumil Jain, A.R For The Respondent : Shri Saurabh Singh, Sr. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in contravention of Explanation (1)(iii) below section 115JB of the Act. It was contended before the CIT(A) that Income tax Act does not prescribe any particular methodology/chronology with regard to carry forward and set off unabsorbed losses/depreciation other than a mere statement of law that the net profit as shown in the profit and loss account is to be reduced by amount of loss brought forward or unabsorbed depreciation whichever is less as per books of account. It was further contended by the assessee before the CIT(A) that in the present case, the assessee, following FEFO method for setting off the losses, first adjusted the loss out of brought forward losses accumulations and therefore out of remaining unabsorbed depreciation against the book profits in the ensuing assessment year on year to year basis. For doing so, the assessee relied upon the decision of the Hon ble Delhi High Court in the case of Eli Lilly Company 334 ITR 186 where similar methodology in the matter of carry forward and set off losses was accepted for MAT purposes and was not interfered. The CIT(A) however did not find merit in the plea raised on behalf of the assessee and refused to interfere with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... NIL 14,623,670 4,419,093 2010-11 99,522 1,943,433 - 1,843,911 14,623,670 4,419,093 NIL 14,623,670 6,263,004 2011-12 6,338,724 - 6,338,724 14,623,670 6,263,004 NIL 9,051,044 5,496,906 6.2 Addressing the issue further, the Ld. A.R submitted that the action of the Assessing Officer in re-computing the book profits is fallacious and unrealistic in as much as if the assessee follows the methodology adopted by the Assessing Officer as referred to at page No. 7 of assessment order, then the total brought forward losses available to the assessee company as on 01.04.2010 stands at a higher figure of ₹ 3,00,78,787/- as against the brought forward losses as per audited books of account of ₹ 2,12,22,430/-. It was thus contended that the action of the A.O is, in fact, detrimental to revenue. A reference to Explanation (1)(iii) was made and it was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied upon the order of the Assessing Officer and CIT(A) and submitted that the Explanation to section 115JB provides for deduction of the lower of book loss or unabsorbed depreciation as per books and therefore the proposition made on behalf of the assessee that deduction amount is for the purposes of quantification alone is not correct. The Ld. D.R submitted that the Assessing Officer has rightly appreciated the issue in perspective which is in line with the ruling delivered by the authority for advance rulings in AAR No. 652 of 2004 in the case of Rastriya Ispat Nigam Ltd. dated 19.07.2006. The Ld. D.R accordingly submitted that no interference with order of lower authorities is called for. 8. We have carefully considered the rival submissions and perused the orders of the authority below and case laws cited. In the instant case, the short issue in controversy is computation of book profit under section 115JB with reference to Explanation (1)(iii) below 115JB. The interpretation of Explanation is thus in question. In this backdrop, we take note of Section 115JB of the Act which contains a special mechanism i.e. Minimum Alternate Tax (MAT) whereby the tax liability of a corpor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in tandem. Secondly and importantly, while applying the aforesaid method, the assessee had first adjusted the book profit of the current year out of brought forward business losses accumulations in preference to the unabsorbed depreciation (quantified to the extent of the lower of the two) regardless of the fact that amount set off represents unabsorbed depreciation being a lower figure. It is the case of the assessee that this method has been adopted consistently on year to year basis. The AO, on the other hand, has purportedly declined to agree with the aforesaid policy of the assessee and has revised the figures of set off while computing the book profit as tabulated. The controversy essentially lies in the manner and methodology of reduction of current years profits adopted by Assessee necessarily out of brought forward losses in preference to unabsorbed depreciation (subject to quantification of amount being lower of the two) irrespective of the fact that unabsorbed depreciation is lower than unabsorbed losses. 8.4 To illustrate, supposedly the assessee has carried forward unabsorbed loss of ₹ 75 and unabsorbed depreciation of ₹ 25 from the preceding financial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther of the two becomes zero, the assessee will not be entitled for set off against books profits as beneficially provided in Clause (iii) to Explanation 1. The spirit of the clause thus requires to be gauged from this restriction placed statutorily. If the methodology adopted by the assessee is endorsed, it may generally defeat a situation where one of the two i.e. unabsorbed loss and unabsorbed depreciation turning NIL. To give effect to the object of Clause (iii), we are of the view that like should be reduced from like and not differently. This means if the lower of the two happens to be unabsorbed depreciation, reduction need to be done from depreciation kitty and not out of unabsorbed loss. Doing so would give fair treatment to the language employed and will be in consonance with the object of Clause (iii) for the purposes of set off. 8.6 At this stage, we also take notice of the Ruling rendered by the Authority of Advance Rulings in the case of Rastriya Ispat Nigam Ltd. (supra) and find that almost similar view has been taken by the authority. While the ruling may not necessarily have the binding force, we are persuaded to adopt the view expressed by the authority rendere ..... X X X X Extracts X X X X X X X X Extracts X X X X
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