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M/s. Multibase India Limited, 74/5-6, Daman Industrial Estate, Kadaiya Village, Nani Daman. V/S ACIT, Valsad Circle, Valsad.
May, 05th 2014
 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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