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TMI Blog2020 (2) TMI 780X X X X Extracts X X X X X X X X Extracts X X X X ..... d for scrutiny. The scrutiny assessment was completed u/s.143(3) r.w.s. 144C(13) of the Act on 21/10/2011 assessing loss at Rs. 10,50,86,086/- under normal provisions of the Act and book profit of Rs. 10,65,68,701/- u/s.115JB of the Act. This assessment was framed pursuant to the directions of the ld. Dispute Resolution Panel-II Mumbai (ld. DRP). In the said assessment, the ld. AO had adjusted the brought forward loss as per books of accounts of the assessee at Rs. 6,77,29,000/- and determined the book profit of the assessee at Rs. 10,65,68,701/-. Later this assessment was sought to be revised by the ld. Administrative CIT on the ground that there were errors in the adjustment of brought forward losses with the book profits while computing the income u/s.115 JB of the Act. The assessee furnished the entire details of cash loss as well as depreciation loss as per its books of accounts for all the earlier years and the manner in which the same was sought to be set off by it while filing the return of income against the book profits u/s.115JB of the Act. The assessee pleaded with the ld. CIT that the ld. AO had consciously applied his mind after verification of the facts with regard t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ification of carry forward of unabsorbed book loss and book depredation to the next assessment year, the assessee has the option to reduce from the current year's profit, either the book loss or the book depreciation, irrespective of which one is lower. 7. In the instant case, the assessee company has been arriving at the amount of brought forward book loss and depreciation by reducing/setting off the profit of the year against the brought book loss and unabsorbed depreciation proportionately. 8. As stated earlier and as will be evident from the computation forwarded herewith the method adopted by the assessee for quantification and/ or carry forword of brought forward book loss/ unabsorbed book depreciation has been followed by it consistently and the method so adopted has been accepted too by the Income-tax Appellate Tribunal vide its Order dated 16 March 2011 passed for the Assessment Year 2004-05. 9. Accordingly, in terms of the working of brought forward book loss and unabsorbed depreciation forwarded herewith, an amount of Rs. 6,77,29,000/- being lower of the brought forward book loss and unabsorbed depreciation is available for set off to the assessee and the same is h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been upheld by ITAT for AY 2004-03 is factually incorrect. Perusal of the said decision indicates that the ITAT has adjudicated on the issue of quantum of business loss or unabsorbed depreciation to be considered for reduction from book profit as per clause (iii) of Explanation] 1 to section 115JB. The assessing officer had rejected the above mentioned method of carry forward adopted by the assessee and worked out the correct position of carry forward business loss and unabsorbed depreciation as per the provisions of the income Tax act,1961. However .for the purpose of clause (iii of Explanation 1) to section 115JB the assessing officer considered the lower of unabsorbed loss and depreciation separately for each year and then made cumulative total of all such lower figure to arrive at the quantum of unabsorbed loss/depreciation for reduction as per clause (iii) of Explanation 1) to section 115 JB." 3.4. The CIT observed in pages 9 & 10 of his order as under:- "Quite clearly, clause (iii) of Explanation 1 to section 1 15JB envisages adjustment for the amount of loss brought forward or unabsorbed depreciation, whichever is less as per books of account. It is quite clear that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to AY 2007-08 is Rs. 50,99,72.000/-. Accordingly, the provision of clause (iii) of Explanation (1) to section 115JB is not applicable as the amount of loss brought forward is Nil. Therefore, assessee is not eligible for any reduction as per clause (iii) of Explanation (1) to section 115JB of the Act. But assessee has claimed reduction of Rs. 6,77,29,000/- under clause (iiii) of Explanation(1) to section 115JB for the purpose of computation of book profit. The assessing officer has allowed the above claim of the assessee without verifying the allowability of the same and this action of the Assessing Officer suffers from error within the meaning of Section 263 of the Act. Further as discussed above, the claim of reduction of Rs. 6,77,29,000/- for the purpose of computation of book profit is not allowable but the assessing officer has allowed the same, therefore the order is prejudicial to the interest of the revenue. Therefore, it is held that the twin conditions for invocation of jurisdiction u/s. 263 of the Income Tax Act are satisfied. From the foregoing discussion and material on record, it is clear that this is a case where the subject matter of notice u/s.263 of the Income Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act. Only the courts have interpreted the manner of set off of losses and had accordingly held that the same had to be done based on the least of accumulated figure of business loss or depreciation loss as per books of accounts. The fact of manner of set off of losses not being specified in provisions of Section 115JB of the Act is also accepted by the revenue in the written submissions filed before us dated 24/04/2017 which is also placed on record. We find that Clause (iii) of Explanation 1 to Section 115JB of the Act merely provides for determination of the amount which is required to be reduced in arriving at the book profits of the year i.e. least of cash loss or depreciation loss as per books of accounts. We find that once that said amount is determined, the Section does not lay down any particular method as to how and from which figure does the said amount have to be reduced in order to arrive at the amount of unutilised depreciation and business loss to be carried forward to the next year. Hence, the contention of the assessee that the lower amount so determined in accordance with the Clause(iii) has to be reduced proportionately from both brought forward business loss a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was rendered in the context of Section 154 of the Act by the Hon'ble Delhi High Court, the analogy drawn thereon could very well be applied to the impugned proceedings u/s.263 of the Act as the underlying principle based on which the Hon'ble Delhi High Court rejected the plea of the revenue was that a possible view has been taken by the ld. AO and the issue in dispute before the Hon'ble Delhi High court was a debatable issue and hence, would not fall within the ambit of mistake apparent on record within the meaning u/s.154 of the Act. The same analogy would certainly be applicable to the facts of the impugned appeal before us in section 263 proceedings of the Act also. 5.2. We also find that the Co-ordinate Bench of Chennai Tribunal in the case of Aircel Cellular Ltd vs. ACIT reported in 20 Taxmann.com 232(Chennai) dated 31/03/2010 also had an occasion to consider similar circumstance where set off of brought forward business loss and depreciation loss as per books of accounts was sought to be disturbed by the ld. CIT u/s.263 of the Act. After considering the elaborate submissions, the Chennai Tribunal held that there was no error in the assessment order passed by the ld. AO as p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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