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TMI Blog2022 (2) TMI 806X X X X Extracts X X X X X X X X Extracts X X X X ..... For the Respondents : Priyadarshi Mishra, Addl. CIT (DR) ORDER Per Chandra Poojari, Accountant Member This appeal by the assessee is against the order of the CIT(Appeals)-3, Bengaluru dated 31.1.2017 for the assessment year 2010-11. 2. The assessee has raised the following concise grounds:- 1. Appellant is engaged in the business of manufacture and sale of instant noodles. 2. Appellant was incorporated in 1988. From 1988 to FY 2004-05, appellant was in loss. Accumulated loss as on 31st March 2005 was ₹ 63,82,74,797. 3. MAT provisions were first applied in FY 2005-06. Since the unabsorbed depreciation was lesser than the business loss, it was set-off year-on-year. (working kept as page no. 73 of the paperbook) 4. In FY 2008-09, the appellant undertook a capital reduction scheme approved the Hon'ble Karnataka High Court. As a result, accumulated loss of ₹ 52,67,81,833 was reduced to Nil and adjusted against the authorized share capital. 5. For FY 2009-10, depreciation loss of ₹ 55,69,139 was set-off and book profit was Nil. This set-off was accepted by the learned DC Circle 12(3) in the scrutiny assessment. Subsequent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad Tribunal and subsequently affirmed by the Gujarat High Court in [(2017) 79 Taxmann.com 209 (Gujarat). 10. In the Prithvi Softech case, the assessee filed return of income for AY 2005-06 with total income as Nil. The assessment was completed after setting-off of brought forward loss of ₹ 1,13,01,457 incurred between FY 2000-01 2002-03. As the balance in P L Dr. Account was Nil and no loss was available for set-off, section 263 was invoked and tax was levied on ₹ 1,13,01,457. The losses b/f from FY 2000-01 were adjusted against the equity share capital and balance in the P L Dr. Account was nil in FY 2003-04. In spite of the accumulated loss being Nil, ₹ 1,13,01,457 was allowed to be set-off and the section 263 proceedings were set-aside. Following the ratio of Prithvi Softech case, even if the P L Dr. balance is Nil, the appellant is entitled to set-off the loss remaining and brought forward from earlier years as per the books. 11. Considering the above submissions, it is prayed that the Hon'ble Tribunal allow the unabsorbed depreciation loss of ₹ 55,69,139 to be set-off against the book profit for FY 2009-10 (AY 2010-11). 3. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lose of the year, the loss was reduced to Nil due to reduction in capital. It was held that the loss is available is for set-off carry forward and the scheme of capital reduction is to be ignored. The question of whether the brought forward losses are liquidated or not is of no consequence. 9. The assessee also relied on Surat Textile Mills Ltd. [2016] 70 taxmann.com 158 (Ahd. Trib.) wherein, it was submitted that, on identical facts of the assessee, it was held in para 21 as follows:- 21. ....... Considering all these factors in their setting as a whole, we are of the view that restructuring credits brought by the assessee to the profit loss account against accumulated profit and loss/debit balance, while giving effect to the scheme sanctioned by the BIFR would not extinguish alleged loss and depreciation from the accounts of the assessee in actual terms. Such loss would be available to the assessee as per the accounts prepared under Parts-II and III of Schedule-VI, and the assessee will be entitled to claim reduction of loss/unabsorbed depreciation, whichever is lower, from the book profit under clause (iii) of Explanation to Section 115JB, while making such computa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the lower authorities. 13. We have heard both the parties and perused the material on record. The only issue in this appeal is with regard to disallowance of unabsorbed depreciation of ₹ 55,69,139 while determining the book profits u/s. 115JB(2) of the Act. The AO allowed this claim of the assessee in the order u/s. 143(3) of the Act dated 30.1.2014. However, the AO issued notice u/s. 154 and withdrew the same as according to the AO, the assessee is not entitled to set off unabsorbed depreciation while computing book profits since no brought forward loss was available to the assessee for the relevant year. 14. Now the contention of the ld. AR is that the assessee had unabsorbed depreciation of ₹ 142,26,245 during AY 2010-11, out of this the assessee is entitled to set off ₹ 56,69,139 during the year and the balance unabsorbed depreciation of ₹ 86,57,606 was to be carried forward to AY 2011-12. For better understanding, we will reproduce the relevant computation below:- 15. However, as per clause (iii) to Explanation 1 to section 115JB(2) of the Act, the assessee is entitled to set off of unabsorbed depreciation or the brought forward business l ..... X X X X Extracts X X X X X X X X Extracts X X X X
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