DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE - 3(1), CHENNAI vs. M/S. TRIUMPH INTERNATIONAL (INDIA) PRIVATE LIMITED, KANCHEEPURAM

Page - 3 - of 11 Limited (2006) taxmann 60 AAR New Delhi. It was contended that the scheme prescribed u/s 115JB(2) deserves to be complied with. 5.0 The Ld.Counsel for the assessee vehemently argued in favour of the order of Ld.CIT(A). It was submitted that it was requested to submit the details regarding of claim of its losses under MAT provisions and to show cause why losses claimed under MAT provisions should not be disallowed. It was argued that without appreciating the submissions of the assessee the disturbance was made to its total income and tax demand raised. The Ld.Counsel argued that the Ld.CIT(A) vide his order dated 22 Nov 2024 correctly allowed the set-off of losses claimed amounting to Rs.5,40,53,120, being cumulative balance of unabsorbed depreciation as per books of accounts the Respondent, under MAT provisions of the Act by relying on the Karnataka decision in the case of Bangalore International Airport Ltd. [2023] 154 taxmann.com 394. 6.0 The Ld.Counsel for the assessee submitted that, as per Explanation under sub-section (2) of Section 115JB of the Act, "book profit" is the net profit shown in the Profit and Loss account as prepared under Sub-section (2) to be reduced, inter-alia, by the amount of loss brought forward or unabsorbed depreciation whichever is less, amongst various other adjustments. Attention was invited to the following extract of the impugned explanation:-

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“(iii) The amount of loss brought forward or unabsorbed depreciation, whichever is less as per books of account. Explanation- For the purposes of this clause, (a) The loss shall not include depreciation; (b) The provisions of this clause shall not apply if the amount of loss brought forward or unabsorbed depreciation is nil”

Thus, it was argued that the assessee has set off the lower of i) total amount of loss brought forward (excluding unabsorbed depreciation) as per books of accounts and ii) total amount of unabsorbed depreciation as per books of accounts for the purposes of set off against the book profits made in the year under consideration. It was argued that the Ld.AO has actually set off the profits earned in earlier AY’s from the quantum of unabsorbed depreciation. Accordingly, the Ld.AO re-determined the quantum of unabsorbed depreciation available for set off in year under consideration as ‘Nil’ and consequently re-determined the lower of the loss brought forward or unabsorbed depreciation as Nil. 7.0 It is the case of the assessee that the MAT provisions under section 115JB do not explicitly prescribe the method of set of losses. Explanation to section 115JB(2) of the Act only provides for the mechanism to determine the amount which needs to be reduced from the book profits and it does not suggest its character as to whether the determined amount is brought forward business loss or unabsorbed

Page - 5 - of 11 depreciation. Reference was also drawn to the concept of “set off” of the amount of a “loss” of an earlier year against the amount of an “income” of the later year under the normal provisions of the Act. It was explained that sections 71B, 72(1), 73(2), 73A(2), 74(1), 74A(3)] are different from the language employed under MAT provisions under section 115JB inasmuch as it merely prescribes only the quantum of deduction while computing book profits and not the manner of set off of losses. The Ld.AR thus argued that the provisions of section 115JB of the Act provides for only a mechanism to determine the amount which will go to reduce the book profits and not the mechanism to set-off such amount from either the brought forward losses or unabsorbed depreciation. It was urged that as long as there is sufficient book losses and unabsorbed depreciation, the lower of the two needs to be set off against the book profits under section 115JB of the Act. Reference was also invited to documents placed in its paper book indicating availability of sufficient brought forward book losses for adjustment in the subject AY under the MAT provisions. 8.0 The Ld.Counsel further argued placing reliance upon the decision of the Hon’ble Karnataka High Court in the case of Bangalore International Airport Ltd [2023] 154 taxmann.com 394 wherein the HC held that cumulative brought forward losses or unabsorbed depreciation

Page - 6 - of 11 as per books of accounts should be considered for set off from the profits while computing book profits under section 11JB: “12. We have carefully perused the explanation to section 115JB of the Act. Clause 2(iii) of Explanation 1 (i)of section 115JB makes it clear that the amount of loss brought forward or unabsorbed depreciation which ever is less as per the books of accounts must be permitted to be set off. The CIT(A)2 and the ITAT3 placing reliance on CBDT4 Circular No. 495 dated September 22, 1987, have rightly held that the cumulative brought forward losses or unabsorbed depreciation should be considered for set off. In view of unambiguous language employed in the statute, no exception can be taken with ITAT's order confirming the CIT(A)'s order holding hat the assessee is entitled to claim set off. So far as the actual amount is concerned, the ITAT has remitted the matter to the Assessing Officer. However, on principle, the ITAT has rightly held that the assessee is entitled to claim set off.”

It was further argued that the Special Leave Petition (SLP) in Bangalore International Airport Ltd [2023] 154 taxmann.com 395 filed against the above decision by the Revenue stands dismissed by the Supreme Court.

9.0 The assessee has placed further reliance upon the decision of the Hon’ble Kolkata Tribunal in the case of Binani Industries Ltd [2017] 82 taxmann.com 320 holding that cash loss or depreciation loss once adjusted/reduced from book profits in earlier AY’s, do not vanish out of the books until it is wiped out by profits in subsequent years. The relevant extract of the decision is as under: Page - 7 - of 11 “3.2....We are in agreement with the arguments of the Learned AR that the losses ( both cash loss and depreciation loss) would continue to remain in the books of accounts till it is wiped off by earning profits by the assessee company and accordingly the same would be available for reduction from book profits u/s 115JB of the Act. We hold that the least of the cash loss or depreciation loss once adjusted/reduced from book profits in earlier assessment years, do not vanish out of the books until it is wiped out by profits in subsequent years. Till such time, the losses would only continue to remain in the books. We hold that for the purpose of computation of book profits u/s 115JB of the Act, every year the situation of least of cash loss and depreciation loss needs to be worked out and reviewed and accordingly the understanding of the Learned AO that such loss once adjusted in earlier year is no longer available for set off is misconceived. Hence we do not find any infirmity in the order of the Learned AO-NAFAC in this regard…..”

10.0 It was submitted that the Assessing Officer has followed the aforesaid decision while computing the losses available for set off: “The same is being done in the MAT computation worked upon by this office. Such losses continue to be in books of account of the assessee until wiped out by the book profits in subsequent years. The setting off of such losses ( cash loss or deprecation loss) by book profits year by year represents their wiping out in phases, ultimately leading them to vanish ( turn to nil).”

The tribunal clearly states the in the computation of book profits u/s 115JB , least of cash loss and depreciaton loss needs to be worked out and reviewed, which in the case of assessee was not clearly done , Page - 8 - of 11 whereas done in the MAT computation given by this office( refer excel sheet attached)

It is the case of the assessee that the Ld.AO has not followed the above decision and has re-worked out the MAT computation as opposed to the prescription in the impugned decision of the tribunal in Binani Industries (supra). It was argued that the Tribunal clearly prescribed that the lower of the loss brought forward or the unabsorbed depreciation do not vanish from the books of accounts unless wiped out by the profits in subsequent years. The Tribunal has held that for each year for the purposes of computation of book profits under section 115JB of the Act, the loss brought forward and the unabsorbed depreciation needs to be worked out as per books of account. It was suggested that the Hon’ble Delhi Tribunal in their decision in case of GO Airlines (India) Ltd [2021] 127 taxmann.com 803 has followed the decision of the Binani Industries (supra) issued by the Kolkata Tribunal and held that unless the entire loss as per books of account gets wiped out by profits earned in subsequent years, the said loss would continue to remain in the balance sheet of the assessee i.e. "books of accounts" and would be eligible for reduction in accordance with clause (iii) of Explanation 1 to Section 115JB of the Act, while computing book profits u/s.115JB of the Act.

Page - 9 - of 11 11.0 We have heard rival submissions in the light of material available on records. We have noted that in this case the issue seminal to the controversy is that whether the loss as per the books of accounts once reduced from books profits in earlier years would not be available for reduction in the subsequent years and the losses would continue to remain in the books of accounts till they are wiped out by profit derived by the assessee. We have also noted that Hon’ble Karnataka High Court in the case of Bangalore International Airport supra has decided the issue in assessee’s favour holding that “…. Clause 2(iii) of Explanation 1 (i)of section 115JB makes it clear that the amount of loss brought forward or unabsorbed depreciation which ever is less as per the books of accounts must be permitted to be set off. The CIT(A)2 and the ITAT3 placing reliance on CBDT4 Circular No. 495 dated September 22, 1987, have rightly held that the cumulative brought forward losses or unabsorbed depreciation should be considered for set off. In view of unambiguous language employed in the statute, no exception can be taken with ITAT's order confirming the CIT(A)'s order holding hat the assessee is entitled to claim set off. So far as the actual amount is concerned, the ITAT has remitted the matter to the Assessing Officer. However, on principle, the ITAT has rightly held that the assessee is entitled to claim set off…….”. We have also noted that the impugned decision of Hon’ble Karnataka High Court has become the law of the land in as much as the SLP of the Page - 10 - of 11 Revenue stands dismissed. We have noted that the Ld.CIT(A) has followed the said decision while giving relief to the assessee. The case laws relied upon by the Revenue have been considered and found to be distinguished on true facts. Further, we have also noted that the order of an Hon’ble Karnataka High Court (supra) of , even a non-jurisdictional high court , in the scheme of judicial discipline, occupies a higher persuasive value. Accordingly, in respectful compliance to the decision of Hon’ble Karnataka High Court (supra), we are of the considered view that there is no case for any intervention to the order of the Ld.CIT(A) at this stage. Accordingly, we uphold the decision of the Ld.CIT(A) and dismiss all grounds of appeal raised by the Revenue. 12.0 In the result, the appeal of the Revenue is dismissed.

Order pronounced on 4th , November-2025 at Chennai. Sd/- Sd/- (जॉजज जॉजज के) (अधिताभ शुक्ला) (GEORGE GEORGE K) (AMITABH SHUKLA) उपाध्यक्ष / vice president लेखा सदस्य /Accountant Member चेन्नई/Chennai, धदनांक/Dated: 4th , November-2025. KB/- आदेश की प्रतितिति अग्रेतिि/Copy to: 1. अिीिार्थी/Appellant 2. प्रत्यर्थी/Respondent 3. आयकर आयुक्त/CIT - Chennai/Coimbatore/Madurai/Salem. 4. तिभागीय प्रतितिति/DR 5. गार्ड फाईि/GF

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