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Income Tax Appellate Tribunal, KOLKATA BENCH “C” KOLKATA
Before: Shri N.V.Vasudevan & Shri Waseem Ahmed
आदेश /O R D E R
PER Waseem Ahmed, Accountant Member:-
This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals)-VI, Kolkata dated 23.08.2013. Assessment was framed by ACIT, Circle-5, Kolkata u/s 143(3) & 115WE(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) vide his order dated 31.12.2009 for assessment year 2007-08. Shri Sanjay Bhattacharya, Ld. Advocate appeared on behalf of assessee and Shri Gouten Hangshing, Ld. Departmental Representative represented on behalf of Revenue.
Hindustan Copper Ltd. Vs. DCIT, Cir-5 Kol. Page 2 2. At the time of hearing Ld. AR for the assessee stated that he has been instructed not to press ground No.1, hence, same is dismissed as not pressed.
Solitary interconnected issue raised by assessee in ground No. 2 & 3 are that LD. CIT(A) erred in confirming the action of Assessing Officer by adding back ₹106,91,00,000/- as excess deduction under the provision of Sec. 115JB(2) of the Act.
Briefly stated facts are that assessee is a Govt. of India enterprise and engaged in the business of mining and sale of copper and other by-products. The assessee in the year under consideration has shown brought forward losses of ₹637.58 crores and unabsorbed depreciation of ₹144.62 crores in its books of account. The AO during the course of assessment proceedings observed that in the immediate preceding assessment year the book profit was determined u/s. 115JB of the Act by adjusting the unabsorbed depreciation of ₹107.47 crores out of the total unabsorbed depreciation of ₹144.62 crores being lower of unabsorbed depreciation. Therefore, the AO in the year under consideration while determining the book profit u/s. 115JB of the Act was of the view that unabsorbed depreciation available is of ₹37.15 crores only (144.62 – 107.47). However, assessee has claimed deduction of ₹144.62 crores while determining the book profit in the current year u/s. 115JB of the Act. Therefore, the AO was of the view that assessee has claimed excess deduction of unabsorbed depreciation by ₹106.91 crores and accordingly disallowed the same while determining the book profit u/s. 115JB of the Act.
Aggrieved, assessee preferred an appeal before Ld. CIT(A). The assessee before Ld. CIT(A) submitted that as per the provision of Act the lower of business loss or unabsorbed depreciation should be allowed to be reduced from the amount of book profit. This exercise has to be carried out each year irrespective of the fact whether any deduction on account of business loss or unabsorbed depreciation has been claimed by assessee in Hindustan Copper Ltd. Vs. DCIT, Cir-5 Kol. Page 3 the earlier years or not. However, Ld. CIT(A) disregarded the contention of the assessee and confirmed the order of AO by observing as under:- “7.3. It was also mentioned out by the appellant, that the assessment order for A.Y 2006-07 passed u/s. 143(3) on 31.12.2011, that the tax liability in that year had been determined under the normal provisions and not under MAT and viewed from that angle, there is no justification in stating, that any unabsorbed book depreciation had been actually set off in that year reducing the amount available for subsequent year. While it is true that tax in AY 2006- 07 had been charged under normal provisions, it is also seen that computation u/s. 115JB had been made in the order. It is well settled that computation under normal provisions and MATD provisions go parallel to and independent of each other. Therefore, the computation u/s. 115JB made during AY 2006-07 has to be taken into consideration. Further, as per the ratio of the ruling in the case of Rashtriya Ispat Nigam Ltd. IN RE (supra), which, it may be added, has been followed by Hon'ble Kerala High Court in the case of CIT vs. Carbon & Chemicals India Ltd 196 taxman 302(Ker.) and by ITAT, Chennai in the case of Laxmi Machine Works vs ACIT 1 ITR (Trib.) 92, as well as the illustration given in Circular no. 495 dated 22.9.1987, figures of book loss and unabsorbed book depreciation in the same have to be taken as the starting point for the computation for the year under appeal. I, therefore, do not find any fault in the working made by the assessing officer. The adjustment made to the book profit is, accordingly, confirmed.”
Being aggrieved by this order of Ld. CIT(A) assessee came in second appeal before us on the following grounds:- “
2. That the Commissioner of Income-tax (Appeals) was wrong in confirming the Assessing Officer’s action while computing the Book Profit u/s 115JB(2), in adding back Rs.106,91,00,000 as alleged excess set off of depreciation.
3. That without prejudice to the contention raised in Ground No. 2 above, the Commissioner of Income-tax (Appeals) failed to appreciate that for computing Book Profit u/s. 115JB(2) for any year, computation made for any earlier year had not been relevant and thus he erred in confirming the addition of Rs.106,91,00,000.”
6. Ld. AR for the assessee submitted that the Circular No. 495 of 1987 dated 22.09.1987 relied by the Ld. CIT(A) was issued under the provision of Sec. 115J of the Act and therefore the same cannot be relied upon as book profit was determined under the provision of Sec. 115JB of the Act, whereas Ld. DR for the Revenue submitted that there is no information whether the unabsorbed depreciation has actually been written off in the books of account or not of the assessee and he vehemently relied on the order of Authorities Below.
Hindustan Copper Ltd. Vs. DCIT, Cir-5 Kol. Page 4 7. We have heard rival contentions of both the parties and perused the materials available on record and the order of Authorities Below. The assessee while determining the book profit under section 115JB of the Act has reduced 144.06 crores being lower of the unabsorbed depreciation. However the AO found that the assessee in the immediate preceding year 2007-08 has adjusted the amount of unabsorbed depreciation to the extent of Rs. 107.47 crores while determining the book profit under section 115JB of the Act. Therefore the AO was of the view that the balance amount of unabsorbed depreciation of Rs. 37.15 crores (144.06-107.47) should be available for the adjustment while determining the book profit under section 115JB of the Act. The view of the AO was also confirmed by the ld. CIT(A). Now the issue before us arises for adjudication so to whether the action of lower authorities is correct in the aforesaid facts & circumstances. In this connection, we find that neither the brought forward loss nor the unabsorbed depreciation has been written off in the books of the accounts. Both are appearing in the books of accounts in-spite of the facts that the unabsorbed depreciation was adjusted in the immediate preceding year to the extent of Rs. 107.47 while determining the book profit under section 115JB of the Act. It is because the aforesaid adjustment was not made in the books of accounts but in the computation of income while determining the book profit as per the provisions of section 115JB of the Act. Thus, law on this issue is fairly clear that the effect has to given for the brought forward loss or unabsorbed depreciation as per the books and as per the provisions of section 115JB of the Act. In this regard, we also rely in the order of Hon’ble Tribunal in the case of DCIT Vs. Binani Industries Limited in ITA 144/Kol/2013 for the AY 2009-10 dated 2.3.2016 wherein it was held as under:- “We have heard the rival submissions and perused the materials available on record. 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 M/s. Binani Industries Ltd 13 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 Hindustan Copper Ltd. Vs. DCIT, Cir-5 Kol. Page 5 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 CIT(A) in this regard. The Ground No.2 raised by the revenue is dismissed.”