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Income Tax Appellate Tribunal, BANGALORE ‘A’ BENCH, BANGALORE
Before: SMT ASHA VIJAYARAGHAVAN & SHRI INTURI RAMA RAO
This appeal by the assessee company is directed against the order of the CIT(A), Bangalore dated 28-10-2013 for the assessment year :
2008-09.
The assessee company has raised the following grounds in its appeal;
“1. The learned CIT(A) erred in confirming the computation of book profits u/s 115JB made by the AO and in doing so;
ITA No.208(B)/2014 a)The ld.CIT(A) failed to appreciate that as per the Scheme envisaged u/s 115JB, the excess provisions for depreciation created in earlier years and written back during the year under assessments ought to have been reduced from the net profits shown in the P&L account. b) The ld.CIT(A) failed to appreciate that for the years in which the said provisions were created, the assessee had no liability to income-tax under the Minimum Alternate Tax regime and consequently, the question of adding back the amount of provisions in those years is immaterial for the assessment year under dispute. c) The ld.CIT(A) failed to appreciate that in order to invoke the proviso to clause(i) of Explanation to sub-section 2 of Sec.115JB, it is necessary that the provisions of said 115JB should have been applicable to the assessee during the preceding previous year during which the provisions were created. The assessee prays for leave to add, modify, delete or introduce additional grounds of appeal at any time before the appeal is disposed off”.
Briefly, the facts of the case are that the assessee-company is incorporated under the provisions of the Companies Act, 1956, it filed return of income for the assessment year 2008-09 disclosing NIL income on 27-09-2008.
ITA No.208(B)/2014 Against the said return, the assessment was completed u/s 143(3) vide order dated 30-12-2010, as nil income under the normal provisions of the income u/s 115JB was computed at Rs.5,81,78,946/- after adding back to the book profit of Rs.2,24,34,829/-, being excess provision for depreciation withdrawn credited to the profit & loss account.
Being aggrieved by this assessment, the assessee filed appeal before the CIT(A), who vide impugned order had dismissed the ground of appeal, by observing as under at para-4;
“4. Ground no.2 is against the addition of excess provision for depreciation of Rs.2,24,34,829/-. No submissions have been made in this regard. However, in t he decision in the case of Mysore Breweries Ltd (Kar.) reported in 29 ITR 289 it is held as follows;
“In view of the insertion of clause (i) to Explanation 1 to Sec.115JB, with retrospective effect, amount set aside as provision for diminution in value of assets is to be added back for computation of book profits under section 115JB (in favour of revenue)”.
In view of the insertion of clause (i) to Explanation 1 to Sec.115JB, with retrospective effect, the amount set
ITA No.208(B)/2014 aside as provision for diminution in the value of assets is to be added back for the computation of book profits under Sec.115JB”.
Being aggrieved, the assessee is in appeal before us.
The learned AR argued that the excess provision for depreciation should be reduced from the profit as disclosed by the profit & loss account for the purpose of determining the taxable income under the provisions of Sec.115JB of the IT Act, 1961. He further submitted that the asseesse company was not liable to tax under the provisions of Sec.115JB of the Act, 1961 for the years in which the provision was created. Therefore, he prayed that the addition many be deleted.
6.1 On the other hand, learned Senior DR relied on the orders of the lower authorities.
We have heard the rival submissions and perused the materials on record. The issue in appeal is to be considered in the light of the provisions contained in clause (i) f Sec.115JB of the IT Act, 1961 which reads as under;
ITA No.208(B)/2014
..……. If any amount referred to in clause (a) (i) is debited to the profit and loss account or if any amount referred to in clause(j) is not credited to the profit and loss account, and as reduced by,
(i) the amount withdrawn from any reserve or provision (excluding a reserve created before the 1st day of April, 1997 otherwise than by way of debit to the profit and loss account), if any such amount is credited to the profit and loss account;
Provided…. That where this section is applicable to an assessee in any previous year, the amount withdrawn from reserves created or provisions made in a previous year relevant to the assessment year commencing on or after the 1st day of April, 1997 shall not be reduced from the book profit of such year has been increased by those reserves or provisions (out of which the said amount was withdrawn) under this Explanation or Explanation below the second proviso to Sec.115JB, as the case may be…..
From the above, it is clear from the provisions that the amount withdrawn from any reserve or provision which is credited to the profit & loss account, can be reduced only in the event where such book profit of such year have been increased by this provision created. From the ITA No.208(B)/2014 material available on record, it is not clear whether provision was added back to the book profit for the purpose of computing taxable income, under the provisions of Sec.115JB of the IT Act, 1961, in the year of creation of provision. Therefore, we are of the considered opinion that interest of justice would be met, if the matter is restored to the file of the AO for de-novo assessment, after affording a reasonable opportunity of being heard to the assessee company. We order accordingly.
In the result, the appeal of filed by the assessee is partly allowed for statistical purposes.
Order pronounced in the open court on the 18th November, 2015.