UNILEVER INDIA EXPORT LTD,MUMBAI vs. DCIT 1(3)(1), MUMBAI

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.

The above said provision is paramateria with the similar clause in section 115JA of the Act. This clause u/s. 115JA was the subject matter of adjudication by the Hon’ble High Court of Kearala in the case of CIT vs. Carban & Chemicals India Ltd. [2011] 196 Taxman 302 (Ker). In the said decision, the Hon’ble High Court was 3683/Mum/2014 Unilever India Export Limited considering the proposition that by virtue of clause (b) of Explanation (iii) to section 115JA deduction is admissible only if the assessee had brought forward business loss as well as depreciation for the previous year. The Hon’ble High Court had elaborately considered the said explanation. We may gainfully refer to the Hon’ble High Court decision as under:

Now we examine the present case on the touchstone of aforesaid decision. The method applied by the ld. Commissioner of Income Tax is in consonance with the method expounded by the Hon’ble High Court above. By taking the exercise in accordance with the above said ratio, the ld. Commissioner of Income Tax has held that the unabsorbed depreciation figure emerges at nil. Hence, the ld. Commissioner of Income Tax has rightly observed that “Consequently, Explanation (b) to Clause(iii) of Explanation (1) to Section 115JB suggests that the un-absorbed depreciation being Nil, the provision of said Clause (iii) shall not apply to the assessee. That means, the assessee shall not be entitled to reduction of the book profit on an account of un-absorbed depreciation or un-absorbed loss. The above position can be clarified by the following workings:

From the above chart it is clear that it was the unabsorbed depreciation of Rs.1,28,30,000/- which was to be adjusted as per the mandate of law. The assessee had following profits in the subsequent assessment years:

These profits for the assessment years 2007-08 and 2008-09 have completely absorbed the unabsorbed carried forward depreciation and there was no unabsorbed depreciation to be adjusted for the present assessment year, i.e., of Rs.1,28,30,000/- for A.Y. 2009-10. As per the mandate of law, the provision of this clause was not to comply if the amount of loss brought forward or unabsorbed depreciation is nil. From the above, it is evident that the said explanation of section 115JB mandates the above said computation of loss brought forward or unabsorbed depreciation, whichever is less to be adjusted. Since as per the computation as above, the unabsorbed deprecation was nil, the deduction of Rs.23,98,823/- claimed by the assessee has rightly been disallowed by the ld. Commissioner of Income Tax.

In the background of the aforesaid discussion and precedent, we are of the considered opinion that the order of the ld. Commissioner of Income Tax is in accordance with the law as confirmed by the Hon’ble Kerala High Court as above. Since we are deciding the issue in favour of the Revenue, on the touch stone of the above said Hon’ble

In this order, the ld. Commissioner of Income Tax (Appeals) has confirmed the order of the Assessing Officer in pursuance to the above said order of the ld. Commissioner of Income Tax (Appeals) u/s. 263 of the I. T. Act. the ld. Commissioner of Income Tax (Appeals) has also shown working which are in accordance with law. Since we have already upheld the order of the ld. Commissioner of Income Tax (Appeals) u/s. 263 of the Act, we are of the opinion that the consequential order of the Assessing Officer confirmed by the ld. Commissioner of Income Tax (Appeals) is also in accordance with the law as elaborately discussed by us hereinabove. Accordingly, we confirm the order of the ld. Commissioner of Income Tax (Appeals).