IN THE INCOME TAX APPELLATE TRIBUNAL " D " BENCH, AHMEDABAD
(BEFORE SHRI D.K. TYAGI, J.M. & SHRI ANIL CHATURVEDI, A.M.)
I.T. A. No. 3211 /AHD/2010
(Assessment Year: 2006-07)
M/s. Multibase India V/S ACIT, Valsad Circle, Valsad.
Limited, (Formerly known
as M/s. Synergy Multibase
Ltd.) 74/5-6, Daman
Industrial Estate, Kadaiya
Village, Nani Daman.
(Appellant) (Respondent)
PAN: ACDPV4956F
Appellant by : Shri HardiK Vora A R
Respondent by : Shri K.C. Mathews, Sr. D.R.
( )/ORDER
Date of hearing : 17-04-2014
Date of Pronouncement : 02 -05-2014
PER SHRI ANIL CHATURVEDI,A.M.
1. This appeal is filed by the Assessee against the order of CIT(A), Valsad
dated 27.09.2010 for A.Y. 2006-07.
2. The relevant facts as culled out from the material on record are as under.
3. Assessee is a company stated to be engaged in the business of
manufacturing and selling of polypropylene compounds and other allied
2 ITA No 3211/AHD/2010
. A.Y. 2006-07
products. Assessee filed its return of income for A.Y. 06-07 on
29.12.2006 declaring total loss of Rs. 95,40,985/-. The assessment was
framed under section 143(3) read with 147 of the Act vide order dated
30.12.2009 and the book profit under section 115JB was assessed at Rs.
1,50,66,867/-. Aggrieved by the order of A.O, Assessee carried the
matter before CIT(A). CIT(A) vide order dated 27.09.2010 partly
allowed the appeal of the Assessee. Aggrieved by the order of CIT(A),
the Assessee is now in appeal before us.
1. On the facts and circumstances of the case the learned CIT(A) has erred in confirming assessment
of book profits of 1,50,66,867/- under section 115JB of the Act by learned Assessing Officer as against
Nil book profit u/s 115JB computed by the assessee.
4. The only effective ground raised by the Assessee is with respect to
computation of book profit under section 115JB of the Act.
5. During the course of assessment proceedings, A.O noticed that Assessee
had shown net profit of Rs. 1,50,66,866/- and had claimed brought
forward losses and unabsorbed depreciation. A.O noted that Assessee had
already claimed unabsorbed depreciation of Rs. 1,68,16,794/- while
computing the tax as per provisions of Section 115JB of the Act for A.Y.
05-06 and therefore no balance of unabsorbed depreciation was left with
the Assessee which could be set off against the current years book profit.
He accordingly re-worked the profit as per provisions of Section 115JB.
Aggrieved by the order of A.O, Assessee carried the matter before
CIT(A). CIT(A) upheld the order of A.O by holding as under:-
8.9 I have carefully considered the finding of the AO and the submissions made by the ld. AR. The AO
while completing the assessment observed that in the A.Y.2005-06 the appellant had shown net profits
of Rs. 3,76,84,545/- after setting off of unabsorbed depreciation of Rs. 1,67,16,794/-. Further
the appellant for the said year shown book profit u/s 115JB of the Act at Rs.2,08,67,751/- and
accordingly paid taxes of Rs.15,65,081/-. Thus the AO concluded that the appellant had already made
3 ITA No 3211/AHD/2010
. A.Y. 2006-07
claim of unabsorbed depreciation in the A.Y. 2005-06 and therefore, no balance is left with the
assessee to adjust further in the A.Y.2006-07. In this circumstances the AO disallowed the adjustment
of unabsorbed depreciation for computing the Book Profits u/s. 115JB for the A.Y.2006-07. On the
other hand the appellant has contended that the Book Profit computed at Nil by the appellant after
setting off of Rs. 1,68,16,794/- is order and as per the law. The appellant furnished the details of carry
forward position as under to buttress the arguments before me.
For the year ended Amount of Amount of loss/ Amount of Amount of
Depreciation (profit) before loss/(profit) Depn. Or loss
depreciation after before depn.
depreciation W/L
31-03=94 0 (290352) (290352) 0
31-03-95 4433885 (3645754) 788131 0
31.03^96 4615061 14814896 19429957 4615061
31-03.97 4754380 33757246 38511626 4754380
31.03-98 5010105 10555567 15565672 5010105
31-03-99 5176965 1203295 6380260 1203295
31.03.00 5440301 1233953 6674254 1233953
31.03.01 5568621 (19921042) (14352421) 0
31.03.02 5965917 (16338031) (10372114) 0
31.03.03 6443596 (16872890) (10429294) 0
31.03.04 6581950 (6561686) 20264 (Loss) 0
31.03.05 6475087 (42459632) (35984545) 0
TOTAL 60465868 (44524430) 15941438 16816794
:
From the table above, it is clear that F.Y. ending on 31-03-2001/02/03 & 05, the appellant had normal
profits and the brought forward loss or depreciation was nil. In the year ending 31.03.2004, there was
normal loss of Rs. 20,264/- only and there was no carry forward unabsorbed depreciation. The current
appeal was for the Assessment Year 2006-07 thereby the financial year being 2005-06. In the year
ending 31,03.2005- the appellant had regular profit of Rs. 3,59,84,545/- after setting off of eligible
depreciation for the year. That means, there was no carry forward business loss or depreciation which
needs to be taken into for computation of book profit u/s. 115JB for the assessment year 2006-07. What
the appellant played mischief was that from the year 1994 till 2005 the appellant had
totaled/aggregated the depreciation, loss and income and the difference between the income and
depreciation loss / business loss has taken for calculation of book profit u/s. 115JB. The Appellant had
also relied upon the - case of Fascel Ltd. Vs. Income Tax Officer 305 ITR(A.T.) 368 (Ahd.) in support
of the arguments put forth before me. At the out set, the case law cited by the appellant is
distinguishable on facts and laws. In that case the Hon'ble Tribunal had held that "In arriving at the
book profit under sec. 115JB, the lower of the amount of brought forward loss or unabsorbed
4 ITA No 3211/AHD/2010
. A.Y. 2006-07
depreciation as appearing in the books of a/c. of the assessee has to be reduced, irrespective of the fact
whether the same is allowable u/s. 79 of the Act or not.
8.10 Proviso to sub-s.(i) of s, 205 of the Companies Act is for the purpose of distribution of dividend
by a company which had earlier incurred losses, the company is required to reduce the current year's
profit by the amount of loss or an amount which is equal to the amount provided for depreciation for
that year or those years whichever is less: It is this very concept, which was incorporated in s. 115J of
the I.T. Act under Explanation, which states that for the purpose of s. 115 J,. "book profit" means the
net profit as shown in the P & L A/c. for the relevant previous year and as reduced by cls. 1 to 4,
Under s. 205 of Companies Act this methodology was prescribed so that the dividend distribution did
not erode capital of the concerned company and the concept was incorporated in s. 115J for the same
purpose i.e. the payment of MAT would not adversely affect the capital of the concerned company
under this deeming provision. In this circumstances it is necessary to examine the legal position
relating to adjustment of brought forward loss or unabsorbed depreciation for computation of Book
Profits as envisaged in the provisions u/s. 115JB r.w. Expl.(iii) of the Act. From 1st. April 2001
onwards sec. 115JB is operative and sec.115JA was operative for the period from 1st.April 1997 till
31st. March'2001. Under both these sections the relevant sub-cl (iii) pertaining to the amount of loss
brought forward or unabsorbed depreciation includes an Explanation, which states that the loss shown
shall not include depreciation. For the sake of convenience sub-cl. (iii) is reproduced hereunder;
"(iii) the amount of loss brought forward or unabsorbed depreciation, whichever is less as per the
books of a/c.
Explanation - For the purpose of this clause-
(a) the loss shall not include depreciations;
(b) the provisions of this clause shall not apply, if the amount of loss brought forward or unabsorbed
depreciation is nil".
Under both ss. 115JA and 115JB, the relevant sub-cl. (iii) pertaining to the amount of loss brought
forward or unabsorbed depreciation includes an Explanation, which states that the loss shown shall
not include depreciation. The Explanation to sub-cl. (iii) therefore leaves no room for doubt that the
expression 'loss brought forward' does not include depreciation and the net profit of the current year is
to be reduced by the lesser of the two and the provisions of sub-cl. (iii) shall not apply if the amount of
loss brought forward or unabsorbed depreciation is reduced to nil. This view was affirmed by the
Hon'ble AAR in the case of Rastriya Ispat Nigam Ltd. IN RE, 285 ITR 1 (AAR). Further for the
purpose of s. 115JB, the 'brought forward loss and unabsorbed depreciation are required to be
depicted separately, independent of each other and after the current year's profit is reduced by the
lesser of the two for the purpose of carry forward to the next year, the closing balance of the
immediate preceding year would be the opening balance for the succeeding year. There can be several
parallel streams of accounting, each of them independently following its own accounting and legal
parameters prescribed by the respective statutes. Sec. 115JB(s) gives statutory recognition to this
general principle by stating that the carry forward of depreciation and loss under the general
provisions of the Act (other than s. 115JB) will be governed by the relevant sections of the Act being s.
32 for depreciation and s. 72 for carry forward and set off of loss, etc. Thus, the parallel streams of
computation under the normal provisions of the Act and s. 115JB computation of tax liability are kept
separate and independent of each other. Each stream, however, while being separate from the other
parallel stream, is based on a continuity of treatment carried out year after year. The principles
governing computation within a particular stream are strictly adhered to in every successive year. On
the same principle, s. 115JB computation must follow the logic of internal consistency and regularity
year after year, unaffected by the parallel computations running under the Companies Act and the
normal provisions of the IT Act. Reduction made to book loss or book depreciation in any particular
year under the MAT provisions must form a necessary basis for computation of 'MAT' liability for the
subsequent year, irrespective of the treatment given under the Companies Act, or, for the matter, under
the normal provisions of the IT Act. The above interpretation is strongly supported by Circular No.
495 dt. 22nd Sept., 1987 as held in the case of Suryalatha Spinning Mills Ltd. vs. Union of India (1997)
223 ITR 713 (AP)
8.11 In the case of S.I.J. Chains (P) Ltd vs. ACIT 100 ITD 379 (Asr.), the Hon'ble ITAT, Amritsar, held
that "assessee's business loss being nil, unabsorbed depreciation was not allowable in computing the
book profits in view of the sec. 115JB(2), Expl. (iii), as substituted by Finance Act, 2002 w.e.f. 1st
April,2001". In view of this, I am convinced that the AO has rightly observed that the record of AY
5 ITA No 3211/AHD/2010
. A.Y. 2006-07
2005-06 shows that the appellant had shown net profit of Rs,. 3,76,84,545/- and after claiming
unabsorbed depreciation of Rs. 1,67,16,794/-, leaving no amount to be carried forward for next year.
Considering the factual matrix of the case. I do not inclined to interfere in the finding of the AO. In my
opinion, the appellant had not only furnished the inaccurate particulars before the AO during the
assessment proceedings, the appellant further played mischief in the appellate proceedings by working
out the book profit in skewed manner. Therefore, this ground of appeal is dismissed. Before parting
the AO is advised to explore initiation of penalty u/s. 271(1)(c) of the I.T. Act, 1961 for furnishing
inaccurate particulars of concealed income as the appellant has played mischief of claiming wrong
carry forward depreciation both during assessment proceeding and appellate proceeding.
6. Aggrieved by the order of CIT(A), the Assessee is now in appeal before
us.
7. Before us, at the outset ld. A.R. submitted a statement showing
bifurcation of brought forward losses and unabsorbed depreciation set off
of losses and balance of depreciation/loss after setting off of profit for
various years. From the statement, he pointed and submitted that the
total depreciation after setting off of profit was Rs. 1,06,17,666/- and the
amount of loss was Rs. 53,24,172/-. He therefore submitted that the
Assessee is eligible for lower of the two and therefore it was eligible for
setting off Rs. 53,24,172/- and therefore submitted that the same be
allowed. The ld. D.R. on the other hand submitted that the chart
submitted by the Assessee contains figures of depreciation/brought
forward losses of earlier years and the same needs to be examined from
the records at the end of A.O. He therefore submitted that the matter be
remitted to the file of A.O. for his examination.
8. We have heard the rival submissions and perused the material on record.
Before us, the ld. A.R. has furnished a statement showing brought
forward losses and unabsorbed depreciation from earlier years and the
working of amount that can be set off for the purpose of Section 115JB.
6 ITA No 3211/AHD/2010
.
A.Y. 2006-07
He also submitted the break up of depreciation and losses to be carry
forward. We are of the view that the statement submitted by Assessee
needs to be examined from the records of assessment and therefore the
issue needs to be remitted to the file of A.O for his examination and
verification. We therefore remit the issue to the file of A.O for
examining the statement submitted by Assessee and thereafter decide the
issue in accordance with law. Assessee is also directed to co-operate by
promptly submitting all the necessary details called for by the A.O. Thus
this ground of Assessee is allowed for statistical purposes.
9. In the result, the appeal of the Assessee is allowed for statistical
purposes.
Order pronounced in Open Court on 02 - 05 - 2014.
Sd/- Sd/-
(D.K. TYAGI) (ANIL CHATURVEDI)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Ahmedabad. TRUE COPY
Rajesh
Copy of the Order forwarded to:-
1. The Appellant.
2. The Respondent.
3. The CIT (Appeals)
4. The CIT concerned.
5. The DR., ITAT, Ahmedabad.
6. Guard File.
By ORDER
Deputy/Asstt.Registrar
ITAT,Ahmedabad
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