M/S. INDIA LAND AND PROPERTIES LIMITED,MUMBAI vs. DCIT, CENTRAL CIRCLE-6(4), MUMBAI

The only issue in this appeal of assessee is against the order of CIT(A) in confirming the action of the Assessing Officer in re-computing the book profit under section 115JB of the Act by invoking the provisions of Section 79 of the Act. For this, assessee has raised the following ground:-

At the outset, the learned Counsel for the assessee Shri Chetan Karia stated that the only issue in the present case is whether computing income for the purpose of under section 115JB of the Act deduction for loss or depreciation, whichever is lower, can be denied by relying on the provisions of Section 79 of the Act on the ground that there is change in share holding. The learned Counsel for the assessee stated the fact that the Assessing Officer recomputed the book profit under section 115JB of the Act at Rs.7,46,85,490/- by ignoring the brought forward business losses as per the books of accounts of Rs.10,71,68,599/- by invoking the provisions of section 79 of the Act. The learned Counsel for the assessee first of all took us through the provisions of section 115JB of the Act and particularly, explanation 1 below sub section 2 of the Act. He explained that as per clause 3, the amount of loss brought forward or unabsorbed

For this, he stated that this issue is squarely covered by the decision of ITAT Ahmadabad Bench in the case of Fascel Ltd. vs. ITO

In our considered opinion, therefore, Revenue authorities are not justified in reducing the loss for assessment year 2000-01 and earlier assessment years by invoking Section 79 of the Act, which is a position under the Income Tax Act, whereas, the lower of the loss brought forward or unabsorbed depreciation that is to be reduced under Clause (iii) of the Explanation, is to be the amount as per the books of account of the assessee. We, accordingly, reverse the orders of the CIT(A) as well Assessing Officer and direct the Assessing Officer to consider the loss as per the books of accounts of the assessee irrespective of the fact whether the same is allowable or not under Section 79 of the Act.”

When these facts were confronted to the learned Sr. DR, she only relied on the orders of the lower authorities.

After hearing both the sides and going through the facts, we are of the view that, Revenue authorities are not justified in reducing the loss for AYs 2009-10 and 2010-11 by invoking the provisions of Section 79 of the Act, which is a position under the Act, whereas, the lower of the losses brought forward or unabsorbed depreciation i.e. to be reduced under clause 3 of the explanation, is to be the amount as per books of