MAKINO INDIA PVT. LTD.,,BANGALORE vs. ACIT,

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH “ A ” BEFORE SHRI N.V. VASUDEVAN, JUDICIAL MEMBER AND SHRI JASON P. BOAZ, ACCOUNTANT MEMBER ITA Nos.935 & 936/Bang/2014 (Assessment Year : 2004-05) Dy. Commissioner of Income Vs. M/s. Makino India Pvt. Ltd., Tax, No.11, EPIP, K.R. Puram, Circle 12(1), Bangalore. Bangalore-560 066 PAN AACCM 6536A Appellant Respondent.

ITA No.1016/Bang/2014 (Assessment Year : 2004-05) M/s. Makino India Pvt. Ltd., Vs. Asst. Commissioner of Income Bangalore-560 066 Tax, Circle 12(1), Bangalore. Appellant Respondent.

Assessee By : Shri K.R. Vasudevan, Advocate. Revenue By : Shri Kaleemulla Khan, JCIT (D.R) Date of Hearing : 04.09.2015. Date of Pronouncement : 4.11.2015. O R D E R Per Shri Jason P. Boaz, A.M. : These are three appeals, one by the assessee and the other two by Revenue, directed against the orders of the CIT (Appeals) – III, Bangalore both dt.28.4.2014 for Assessment Year 2004-05. 2. The facts of the case, briefly, are as under :- 2.1 The assessee company, engaged in the manufacture of machine tools filed its return for Assessment Year 2004-05 on 1.11.2004 declaring loss of Rs.1,27,87,600 and ‘book profits’ of Rs.25,20,396 under Section 115JB of the Income Tax Act, 1961 (in short 'the Act'). The return was processed under Section 143(1) of the Act and the

2 ITA Nos.935, 936 & 1016/Bang/2014 case was subsequently taken up for scrutiny. The assessment was completed under Section 143(3) of the Act vide order dt.28.12.2006 determining the loss under normal provisions of the Act at Rs.1,11,08,860 in view of the following additions / disallowances :- (i) Addition towards PF and ESI : Rs.1,48,634. (ii) Towards excess depreciation : Rs.3,37,292. (iii) Excess deduction under Section 10A : Rs.11,92,860. The ‘book profits’ under Section 115JB were computed as under :- Profits before tax as per P&L Account : Rs.2,05,86,685. Add 1)Income tax paid Rs.24,19,800. 2)Expenses related to exempt income : Rs.86,29,205 Rs.1,10,49,005. Less i)Income on which deduction u/s.10A Rs.1,48,49,273. claimed : (ii) Amount of loss or unabsorbed Rs.64,34,368 Rs.2,12,83,641. depreciation : ‘Book Profits’ : Rs.1,03,52,049.

2.2 Aggrieved by the order of assessment for Assessment Year 2004-05 dt.28.12.2006, the assessee preferred an appeal before the CIT (Appeals) – III, Bangalore. The learned CIT (Appeals) disposed off the appeal by order dt.28.4.2014 granting the assessee partial relief. 3.1 Aggrieved by the order of the CIT (Appeals) – III, Bangaloredt.28.12.2006 for Assessment Year 2004-05, Revenue has preferred this appeal in ITA No.935/Bang/2014 raising the following grounds :- “ 1. The order of the learned CIT (Appeals) is opposed to law and facts of the case. 2. On the facts and in the circumstances of the case the learned CIT (Appeals) erred in law in directing the Assessing Officer to exclude the reimbursement of certain expenses both from the export turnover as well as from total turnover for the purpose of computation of deduction under Section 10A, without appreciating the fact that the statute allows exclusion of such expenditure only from export turnover by way of specific definition of export turnover as envisaged by sub-clause (4) of Explanation 2 below sub-section (8) of Section 10A and the total turnover has not been defined in this section.

3 ITA Nos.935, 936 & 1016/Bang/2014 3. On the facts and in the circumstances of the case the learned CIT (Appeals) erred in directing the Assessing Officer to compute deduction under Section 10A in the above manner by placing reliance on the decision of Hon'ble High Court of Karnataka in the case of M/s. Tata Elxsi Ltd., which has not become final since the same has not been accepted by the Department and SLPs are pending before the Hon'ble Supreme Court. 4. For these and other grounds that may be urged at the time of hearing, it is prayed that the order of the CIT (Appeals) in so far as it relates to the above grounds may be reversed and that of the Assessing Officer may be restored. 5. The appellant craves leave to add, alter, amend and / or delete any of the grounds mentioned above.” 3.2 The Grounds raised at S.Nos.1, 4 and 5 are general in nature and therefore no adjudication is called for thereon. 3.3 Grounds at S.Nos.2 and 3 – pertaining to deduction under Section 10A of the Act is the only issue raised in Revenue’s appeal challenging the decision of the learned CIT (Appeals) in directing the Assessing Officer to exclude certain expenses from both export turnover as well as total turnover while computing the eligible deduction under Section 10A of the Act and in following the decision of the Hon'ble Karnataka High Court in the case of Tata Elxsi Ltd. reported in 349 ITR 98 (Kar.), while doing so, as the said decision has not been accepted by the Department and the SLP in the matter is pending before the Hon'ble Apex Court. 4.1 In the meanwhile, the Assessing Officer initiated proceedings under Section 147 of the Act and reopened the assessment for Assessment Year 2004-05 by issue of notice under Section 148 of the Act. The reassessment proceedings were completed exparte under Section 144 rws 147 of the Act vide order dt.29.12.2009, wherein the loss under normal provisions was computed at Rs.34,65,112. The ‘book profits’ under Section 115JB of the Act was determined at Rs.1,66,60,438 as under :- Profits before tax as per P&L Account : Rs.2,05,86,685. Add 1)Income tax paid Rs.24,19,800. 2)Expenses related to exempt income : Rs.86,29,205 Rs.1,10,49,005. Rs.3,14,35,690. Less i)Income on which deduction u/s.10A Rs.1,48,49,273. claimed : (ii) Amount of loss or unabsorbed Rs.1,25,979 Rs.1,49,75,252. depreciation, whichever is less : ‘Book Profits’ u/s. 115JB : Rs.1,66,60,438.

4 ITA Nos.935, 936 & 1016/Bang/2014 4.2 Aggrieved by the order of assessment under Section 144 rws 147 of the Act dt.29.12.2009 for Assessment Year 2004-05, the assessee preferred an appeal before the CIT (Appeals) – III, Bangalore who disposed off the appeal vide order dt.28.4.2014 allowing the assessee partial relief. 4.3 Aggrieved by the order of the CIT (Appeals) – III, Bangalore dt.28.4.2014 for Assessment Year 2004-05, both Revenue and the assessee have preferred appeals before the Tribunal raising the following grounds :- 4.4 Grounds in Revenue’s appeal in ITA No.936/Bang/2014. “ 1. The order of the learned CIT (Appeals) is opposed to law and facts of the case. 2. On the facts and in the circumstances of the case the learned CIT (Appeals) erred in directing the Assessing Officer to compute deduction under Section 10A without setting off of losses (depreciation / business)pertaining to non-10A unit against the profit of 10A unit by replacing reliance on the decision of Hon'ble High Court of Karnataka in the case of M/s. Yokogawa India Ltd., but without appreciating the fact that as per amended provisions of section 10A, deduction under Section 10A has to be allowed from the total income of the assessee, and as per section 2(45) of the IT Act, the total income should be computed from various sources after set off of losses from one source against income from other sources under the same head of Income in terms of section 70(1). 3. On the facts and in the circumstances of the case the learned CIT (Appeals) erred in directing the Assessing Officer to compute deduction under Section 10A in the above manner by placing reliance on the decision of Hon'ble High Court of Karnataka in the case of M/s. Yokogawa Ltd. which has not become final since the same has not been accepted by the Department and SLPs are pending before the Hon'ble Supreme Court on this issue. 4. For these and other grounds that may be urged at the time of hearing, it is prayed that the order of the CIT (Appeals) in so far as it relates to the above grounds may be reversed and that of the Assessing Officer may be restored. 5. The appellant craves leave to add, alter, amend and / or delete any of the grounds mentioned above.” 4.4.1 The Grounds raised at S.Nos.1, 4 & 5 are general in nature and therefore no adjudication is called for thereon. 4.4.2 The Grounds at S.Nos.2 and 3 pertaining to deduction under Section 10A of the Act is the sole issue for consideration against the decision of the CIT (Appeals) in directing the Assessing Officer to compute the deduction under Section 10A of the Act without setting off the losses pertaining to non-10A units against the profits of 10A units and in following the decision of the Hon'ble Karnataka High Court in the case of Yokogawa India Ltd., in 341 ITR 345 (Kar) while doing so, since the said decision of the

5 ITA Nos.935, 936 & 1016/Bang/2014 Hon'ble High Court has not been accepted by the Department and the SLP in the matter is pending before the Hon'ble Apex Court.

4.5 Grounds in Assessee's appeal in ITA No.1016/Bang/2014. “ 1. Reopening of assessment 1.1 The learned CIT (Appeals) erred in upholding the action of the learned Assessing Officer in reopening the assessment by issue of notice under Section 148 and passing order under Section 147 read with section 143(3) even though all the material facts relating to the above mentioned assessment were available at the time of assessment proceedings under Section 143(3) of the Income Tax Act, 1961. 1.2 The learned CIT (Appeals) erred in not appreciating that there is no failure on the part of the appellant in fully and truly disclosing all the material facts for the assessment for this assessment year. 1.3 The learned CIT (Appeals) erred in not appreciating that no new material or new information has been brought on record to warrant reopening of assessment. 2. Reduciton of unabsorbed tax depreciation while computing book profits under Section 115JB – Rs.1,18,20,816. The learned CIT (Appeals) erred in upholding the action of learned Assessing Officer in reducing lower of unabsorbed business loss or unabsorbed depreciation loss as per tax provisions amounting to Rs.125,979 instead of reducing unabsorbed business loss or unabsorbed depreciation loss as per books of accounts amounting to Rs.11,820,816. The appellant craves leave to add, to alter or amend all or any of the aforestated grounds of appeal. For the above and any other grounds which may be revised at the time of hearing, it is prayed that the order of the learned CIT (Appeals) be set aside. ” As all three appeals pertain to the same Assessment Year 2004-05, they were heard together and are being disposed off by way of this common order. Revenue’s appeal in ITA No.935/Bang/2014. 5. The Grounds raised at S.Nos.1, 4 & 5 are general in nature and therefore no adjudication is called for thereon. 6.1 Grounds 2 and 3 – Deduction u/s.10A of the Act. 6.1 The only issue raised in this appeal by Revenue is against the decision of the learned CIT (Appeals) in directing the Assessing Officer that certain expenses incurred that are excluded from ‘export turnover’ while computing the deduction under Section 10A of the Act and thereby following the decision of the Hon'ble jurisdictional High

6 ITA Nos.935, 936 & 1016/Bang/2014 Court in Tata Elxsi Ltd. & Others 349 ITR 98 (Kar.) against which the Department’s SLP is pending disposal before the Hon'ble Apex Court. 6.2 We have heard both sides and carefully perused and considered the material on record. on this very issue, the Hon'ble Karnataka High Court in the case of CIT Vs. Tata Elxsi Ltd and Others reported in 349 ITR 98 (Kar), has held that while computing the deduction under section 10A, if the export turnover in the numerator is to be arrived at after excluding certain expenses, then the same should also be excluded from the total turnover in the denominator. The relevant operative portion of the finding of the Hon'ble jurisdictional High Court is extracted and reproduced as under : “ if the export turnover in the numerator is to be arrived at after excluding certain expenses, the same should also be excluded in computing the export turnover in the denominator also. The reason being that the total turnover includes export turnover. The components of the export turnover in the numerator and denominator cannot be different. Therefore, though there is no definition of the term ‘total turnover’ in section 10-A, there is nothing in the said section to mandate that, what is excluded from the numerator that is export turnover would nevertheless form part of the denominator. Though when a particular word is not defined by the legislature and an ordinary meaning is to be attributed to the same, the said ordinary meaning to be attributed to such word is to be in conformity with the context in which it is used. When the statute prescribes a formula and in the said formula, 'export turnover' is defined, and when the 'total turnover' includes 'export turnover', the very same meaning given to the 'export turnover' by the legislature is to be adopted while understanding the meaning of the 'total turnover', when the 'total turnover', includes 'export turnover'. If what is excluded in computing the 'export turnover' is included while arriving at the 'total turnover', when the 'export turnover' is a component of 'total turnover', such an interpretation would run counter to the legislative intent and impermissible. If that were the intention of the legislature, they would have expressly stated so. If they have not chosen to expressly define what the 'total turnover' means, then, when the 'total turnover' includes 'export turnover', the meaning assigned by the legislature to the 'export turnover' is to be respected and given effect to, while interpreting the 'total turnover' which is inclusive of the 'export turnover'. Therefore the formula for computation of the deduction under section 10A, would be as under : Profits of the business x Export turnover of the undertaking (Export turnover + domestic turnover) Total Turnover.”

7 ITA Nos.935, 936 & 1016/Bang/2014 In the light of the above facts and respectfully following the decision of the Hon'ble Karnataka High Court in the case of Tata Elxsi Ltd. & Others (supra), we direct the Assessing Officer to exclude the expenses incurred in foreign currency both from export turnover as well as from the total turnover while calculating the eligible deduction under section 10A of the Act. 7. In the result, Revenue’s appeal in ITA No.935/Bang/2014 for Assessment Year 2004-05 is dismissed. Revenue’s appeal in ITA No.936/Bang/2014 for A.Y. 2004-05. 8. The Grounds at S.Nos.1, 4 & 5 are general in nature and therefore no adjudication is called for thereon. 9. Grounds at S.No.2 and 3 – Deduction u/s.10A of the Act. 9.1 The only issue raised by Revenue in this appeal is in contending that the decision of the learned CIT (Appeals) in the impugned order was erroneous in directing the Assessing Officer to compute the deduction under Section 10A of the Act without setting off the losses pertaining to non-10A units against the profits of the 10A units by placing reliance on the decision of the Hon'ble High Court of Karnataka in the case of Yokogawa India Ltd. reported in (2012) 341 ITR 345 (Kar) which had not become final since the Department’s SLP against the same was pending disposal before the Hon'ble Apex Court. 9.2.1 The Assessing Officer has reopened the assessment for Assessment Year 2004- 05 by issue of notice under Section 148 of the Act for the reason that the assessee had claimed the deduction under Section 10A of the Act in the year, even though there was a business loss and unabsorbed depreciation from the earlier year which the assessee had not set off before computing the deduction under Section 10A of the Act. The Assessing Officer observed that if these losses were set off against the income of the current year, there was no positive income and in that view of the matter, the Assessing Officer disallowed the entire deduction claimed under Section 10A of the Act. 9.2.2 On appeal, the learned CIT (Appeals) following the decision of the Hon'ble jurisdictional High Court in the case of Yokogawa India Ltd. (supra) directed the Assessing Officer to compute the deduction under Section 10A of the Act without

8 ITA Nos.935, 936 & 1016/Bang/2014 setting off the losses carried out forward from earlier years pertaining to non-10A units against the profits of the 10A units for the current year. 9.3.1 We have heard the rival contentions of both parties and perused and carefully considered the material on record. We find that the issue of setting off losses against the income from 10A units has been settled by the decision of the Hon'ble High Court of Karnataka in the case of Yokogawa India Ltd. (supra) wherein the Hon'ble Court has held that in respect of Section 10A of the Act , the phrase ‘total income’ in Section 10A(1) is to be understood as the income of each such 10A unit and cannot mean ‘total income’ as computed in accordance with the normal provisions of the act. It was also held that as the relief under Section 10A of the Act is in the nature of exemption even though termed as deduction, the profits from such 10A units is neither subject to the charge of income tax nor includible in total income. The Hon'ble Court held that the income eligible for deduction under Section 10A would not enter into the computation at all and would have to be granted at source itself and the process of computation of profits and gains from business and profession would only commence thereafter. At paras 19, 20, 31 to 33 of the Hon'ble Court has held as under :- “19. It is after the deduction under Chapter VI-A that the total income of an assessee as arrived at. Chapter VI-A deductions are the last stage of giving effect to all types of deductions permissible under the Act. At the end of this exercise, the total income is arrived at. Total income is thus, a figure arrived at after giving effect to all deductions under the Act. There cannot be any further deduction from the total income as the total income is itself arrived at after all deductions. 20. From the aforesaid discussion it is clear that the income of 10A unit has to be excluded before arriving at the gross total income of the assessee. The income of 10A unit has to be deducted at source itself and not after computing the gross total income. The total income used in the provisions of section 10A in this context means the global income of the assessee and not the total income as defined in section 2(45). Hence, the income eligible for exemption u/s 10A would not enter into computation as the same has to be deducted at source level. --------------------------------------------------------------

9 ITA Nos.935, 936 & 1016/Bang/2014 31. After making all such computation the assessee would be entitled to the benefit of set off or carry forward of loss as provided u/s 72 of the Act. That is the benefit which is given to the assessee under the Act irrespective of the nature of business which he is carrying on. The said benefit is available even to undertakings u/s 10B of the Act. The expression “deduction of such profits and gains as derived by an undertaking shall be allowed from the total income of the assessee”, has to be understood in the context with which the said provision is inserted in Chapter III of the Act. Sub-section (4) of section 10A clarifies this position. It provides that the profits derived from export of articles or things from computer software shall be the amount which bears to the profits of the business of the undertaking, the same proportion as the export turnover in respect of such articles or things or computer software bears to the total turnover of the business carried on by the undertaking. Therefore, it is clear that though the assessee may be having more than one undertaking for the purpose of section 10A it is the profit derived from export of articles or things or computer software from the business of the undertaking alone that has to be taken into consideration and such profit is not to be included in the total income of the assessee. It is only after the deduction of the said profits and gains, the income of the assessee has to be computed. 32. The provisions of this sub-section will apply even in the case where an assessee has opted out of section 10A by exercising his option under sub-section (8). As discussed, it is permissible for an assessee to opt in and opt out of section 10A. In the year when the assessee has opted out, the normal provisions of the Act would apply. The profits derived by him from the STP undertaking would suffer tax in the normal course subject to various provisions of the Act including those of Chapter VI-A. If in such a year, the assessee has suffered losses, such losses would be subject to inter source and inter head set off. The balance if any thereafter can be carried forward, for being set off against profits of the subsequent assessment years in the normal course. Unabsorbed depreciation also merits a similar treatment. 33. As the income of 10-A unit has to be excluded at source itself before arriving at the gross total income, the loss of non 10-A

10 ITA Nos.935, 936 & 1016/Bang/2014 unit cannot be set off against the income of 10-A unit u/s 72. The loss incurred by the assessee under the head profits and gains of business or profession has to be set off against the profits and gains if any, of any business or profession carried on by such assessee. Therefore as the profits and gains under section 10-A is not be included in the income of the assessee at all, the question of setting off the loss of the assessee of any profits and gains of business against such profits and gains of the undertaking would not arise. Similarly, as per section 72(2), unabsorbed business loss is to be first set off and thereafter unabsorbed depreciation treated as current years depreciation u/s 32(2) is to be set off. As deduction u/s 10A has to be excluded from the total income of the assessee, the question of unabsorbed business loss being set off against such profit and gains of the undertaking would not arise. In that view of the matter, the approach of the assessing authority was quite contrary to the aforesaid statutory provisions and the appellate Commissioner as well as the Tribunal were fully justified in setting aside the said assessment order and granting the benefit of section 10A to be assessee. Hence, the main substantial question of law is answered in favour of the assessees and against the revenue”. 9.3.2 Respectfully following the decision of the Hon'ble Karnataka High Court in the aforesaid case of Yokogawa India Ltd. (supra), we uphold the decision of the learned CIT (Appeals) in directing the Assessing Officer to compute the deduction under Section 10A of the Act without setting off the losses of the non-10A units both current and carried forward from earlier years against 10A units. Consequently Grounds 2 and 3 of Revenue’s appeal are dismissed. 10. In the result, Revenue’s appeal in ITA No.936/Bang/2014 is dismissed. Assessee's appeal for Assessment Year 2004-05 in ITA No.1016/Bang/2014. 11. Ground No.1 (1.1to 1.3) – Reopening of Assessments 11.1 In the Grounds at 1 (1.1 to 1.3), the assessee had challenged the reopening of the assessment for Assessment Year 2004-05 by initiating proceedings under Section 147 of the Act and by issue of notice under Section 148 of the Act. However, in the course of proceedings before us, the learned Authorised Representative for the assessee submitted that the assessee is not pressing these grounds at 1 (1.1 to 1.3)

11 ITA Nos.935, 936 & 1016/Bang/2014 pertaining to the reopening of assessment. We, therefore, dismiss the Grounds raised at S.Nos.1 (1.1 to 1.3) as not pressed. 12. Ground No.2 – Computation of ‘Book Profits’ u/s.115JB. 12.1 Ground No.2, therefore remains the only issue for adjudication i.e. in respect of the question of losses considered by the Assessing Officer while computing the ‘book profits’ under Section 115JB of the Act. 12.2.1 In the computation of income, the assessee had determined ‘book profits’ under Section 115JB of the Act at Rs.28,20,390 while computing the book profits, the assessee reduced an amount of Rs.1,18,20,816 towards the amount of loss brought forward or unabsorbed depreciation, whichever is less as per the books of accounts. While concluding the assessment under Section 143(3) of the Act vide order dt.28.12.2006, the Assessing Officer determined the losses at Rs.1,18,08,800 and also computed the losses and depreciation carried forward, as per the chart at page 4 of the order of assessment, as under :- Asst. Year Unabsorbed Unabsorbed Set off during Balance business losses depreciation A.Y. 2004-05 carried forward 2002-03 1,25,979 -- -- 1,25,979 2003-04 63,08,389 3,92,55,854 -- 4,55,64,243 2004-05 -- 1,11,08,860 -- 1,11,08,860 Total : 64,34,368 5,03,64,714 -- 5,67,99,082 While computing the ‘book profits’ under Section 115JB of the Act, the Assessing Officer considered the amount of Rs.64,34,368 as being the lesser of business losses or unabsorbed depreciation. 12.2.2 However, in the reassessment order passed under Section 144 rws 147 of the Act dt.29.12.2009, the Assessing Officer considered an amount of Rs.1,25,979 only while computing the book profits under Section 115JB of the Act. In coming to this finding, the Assessing Officer observed that as per the provisions of Section 115JB(2)(iii) of the Act, the book profits have to be computed after reducing the amount of loss brought forward or unabsorbed depreciation, whichever is less, as per the books of accounts and for the purposes of this clause; a) the loss shall not include depreciation, and

12 ITA Nos.935, 936 & 1016/Bang/2014 b) the provisions of this clause shall not apply if the amount of loss brought forward is unabsorbed depreciation. 12.2.3 The assessee carried the matter in appeal to the learned CIT (Appeals) who rejected the assessee's contentions that the loss ought to be considered at Rs.1,18,20,816; making the following observations:- i) the purported book loss and depreciation of the amalgamating unit, viz. Makino Asia Pte Ltd., is claimed to be Rs.1,01,19,732. ii) These facts and figures have not been brought on record in the assessment proceedings of the amalgamated entity, viz. Makino India Pvt Ltd. for Assessment Year 2003-04. iii) In the revised return of income filed by the assessee for Assessment Year 2003-04 on 31.10.2004, the total loss claimed is Rs.5,26,18,845, comprising of business loss of R.63,08,389 and depreciation of Rs.4,63,10,456. iv) The figure of loss as per the books of account of Makino Asia Ltd. i.e. business loss of Rs.1,18,20,816 and depreciation of Rs.1,30,97,205 are not reflected; v) During the proceedings for Assessment Year 2003-04, the assessee claimed that the Indian Branch of Makino does not have any accumulated losses (business loss and unabsorbed depreciation). In view of the above reasons, the learned CIT (Appeals) held that the assessee's claim is not in order and rejected the contentions of the assessee and upheld the Assessing Officer’s finding in the matter. 12.3 In the course of appellate proceedings before us, on 24.9.2015, the learned Authorised Representative for the assessee submitted that there was errors in the Assessing Officer’s computation of ‘book profits’ and filed the following reconciliation statement giving a comparison between the ‘book profits’ computed by both the assessee as well as the Assessing Officer :-

13 ITA Nos.935, 936 & 1016/Bang/2014 Particulars As per A.O. As per Amount Assessee (Rs.) Amount (Rs.) Profit as per P/L Account 20,586,685 20,586,685 Add : Amount of income tax paid 2,491.800 2,491.800 Amount of expenses relatable to exempt income 8,629,205 8,629,205 31,635,690 31,635,690 Less Income on which 10A deduction claimed 14,849,237 14,849,237 Amount of brought forward business loss or 125,979 11,820,816 depreciation (whichever is lower) 14,975,252 26,670,053 Book Profit 16,660,438 5,037,637

Along with the above details, the learned A.R. also submitted the year-wise break-up of business loss and unabsorbed depreciation, as per the financial statements and copy of the relevant extracts from the assessee financial statements. It was submitted by the learned Authorised Representative that these details would give the correct picture and working for computation of book profits under Section 115JB of the Act. 12.4 The learned Departmental Representative strongly supported the learned CIT (Appeals) finding in the impugned order on this issue. 12.5.1 We have heard the rival contentions and perused and carefully considered the material on record. We find from the record that in the original order of assessment, the Assessing Officer had determined the carry forward business loss at Rs.64,34,368 and considered the same for determining the ‘book profits’ u/s.115JB of the Act. However, in the reassessment order, the Assessing Officer has only considered the business loss of Rs.1,25,979, which is the carry forward business loss of Assessment Year 2002-03 for computing the book profits under Section 115JB of the Act. The Assessing Officer, however, has not assigned any reasons or explained as to why the carry forward business loss for Assessment Year 2003-04 was not considered. Further, as pointed out by the learned Authorised Representative of the assessee in the computation, there appears to be a mistake in the computation made by the Assessing Officer. Be that as it may, we also observe

14 ITA Nos.935, 936 & 1016/Bang/2014 that the assessee has not properly explained the contradictions in the claims made by the assessee both in the earlier years and in the year under consideration in respect of the issue of determination of book profits under Section 115JB of the Act. We also find that the reconciliation statement filed by the assessee before us was not filed before the authorities below. In view of the above factual matrix of the case on this issue, we are of the considered opinion that it would only be appropriate to remand the issue back to the file of the Assessing Officer for fresh consideration and adjudication thereon as per law after affording the assessee adequate opportunity of being heard and to file details/submissions required which shall be duly considered. It is ordered accordingly. Ground No.2 is, therefore, treated as allowed for statistical purposes. 13. In the result, the assessee's appeal for Assessment Year 2004-05 is treated as partly allowed for statistical purposes. 14. To sum up, Revenue’s appeals for Assessment Year 2004-05 in ITA No.935 & 936/Bang/2014 are dismissed and the assessee's appeal for Assessment Year 2004-05 is treated as partly allowed for statistical purposes. Order pronounced in the open court on 4th Nov., 2015.

Sd/- Sd/- (N.V.VASUDEVAN) (JASON P BOAZ) Judicial Member Accountant Member *Reddy gp Copy to : 1. Appellant 2. Respondent 3. C.I.T. 4. CIT(A) 5. DR, ITAT, Bangalore. 6. Guard File. (True copy) By Order

Asst. Registrar, ITAT, Bangalore