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Income Tax Appellate Tribunal, ‘’ B’’ BENCH, AHMEDABAD
Before: SHRI WASEEM AHMED & SHRI SIDDHARTHA NAUTIYAL
आदेश/O R D E R
PER WASEEM AHMED, ACCOUNTANT MEMBER:
The captioned appeal has been filed at the instance of the revenue against the order of the National Faceless Appeal Centre(NFAC), arising in the matter of assessment order passed under s.154 of the Income Tax Act, 1961 (here-in-after referred to as "the Act") relevant to the Assessment Year 2016-17.
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The Revenue has raised the following grounds of appeal:
Whether on facts and circumstances and in law, the Ld.CIT(A) has erred in deleting the books profit u/s.115JB at Rs.8,99,28,099/- determined by the AO considering all the relevant documents like P & L account. Balance sheet, form No.29B and form 3 CD and the facts of the case. 2. The appellant craves leave to amend or alter any ground or add a new ground, which may be necessary. 3. It is, therefore, prayed that the order of Ld.CIT(A) may be set aside and that of the Assessing Officer be restored. 3. The only issue raised by the revenue is that the learned CIT-A erred in calculating the amount of book profit at nil which was determined by the AO at ₹ 8,99,8099.00 under section 115 JB of the Act.
The necessary facts arising from the order of the authorities below are that the assessee in the present case, a private limited company, is engaged in the business of dealing in wash basins, sinks, and sanitary ware etc. The assessee for the year under consideration has filed its return of income declaring an income of Rs. NIL which was assessed by the AO in the assessment framed under section 143(3) of the Act dated 26-11-2018 at ₹ 98,77,791.00 only under normal computation of income. The AO in such assessment order has also determined the book profit at Rs. NIL under the provisions of section 115 JB of the Act.
4.1 However, the AO subsequently initiated the rectification proceedings under section 154 of the Act. As per the AO, the assessee has taken the profit as per profit and loss account at Rs. 21,37,74,740/- for the purpose of book profit under section 115 JB of the Act against which the amount of brought forward unabsorbed loss of Rs. 12,38,26,381/- were adjusted. Thus, the AO determined the book profit at Rs. 8,99,28,099/- for calculating the liability under the provisions of section 115 JB of the Act in the rectification order passed under section 154 of the Act dated 04-08-2021.
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Aggrieved assessee preferred an appeal to the ld. CIT-A.
The assessee before the ld. CIT-A submitted that it has worked out the amount of book profit as per form 29B at NIL under section 115 JB of the Act. As per the assessee, there was credited its profit and loss account by the amount of deferred tax liability amounting to Rs. 19,43,32,844/- which was to be adjusted in arriving to book profit. But the AO has not considered the same.
6.1 Likewise, the assessee further submitted that AO in computing the unabsorbed loss has taken wrong amount of loss for AY 2010-11 and 2011-12 lower by the amount by Rs. 5,65,276.00 and 14,157.00 only.
6.2 The assessee further submitted that there was positive income before depreciation of Rs. 14,70,607.00 for the AY 2014-15 against which there was made a claim of depreciation of Rs. 9,22,14,685.00 which effectively resulted in unabsorbed depreciation of Rs. 9,07,44,078.00 only. But the AO wrongly reduced the losses against the positive income of Rs. 14,70,607.00 while calculating the amount of brought forward losses to be adjusted in calculating the book profit under section 115JB of the Act.
The learned CIT-A after considering the submission allowed the appeal of the assessee by observing as under:
Assesses has pointed out in grounds of appeal no. 1 that the AO did not allow the deduction of Rs. 19,43,32,844/- from the net profit for deriving the book profit. From perusal of Schedule MAT of the return and Form No. 29B, it is found that the claim of the assessee is correct. The Assessing officer in his order at para 3 has taken the book profit at Rs.21,37,74,480/-. Narration is, Book Profit as per Form 29B for AY 2016-17, 21,37,74,480/-" But this is not correct, book profit as per form 29B is 0 (NIL). This is the figure appearing at row 12 of the form 29B. Rs.21,37,74,480/- is the Net Profit at row 8 of the form 29B. This issue was mentioned by the assessee company in para 12 in its submission dated 01.03.2021, submitted on 02.03.2021. However, the order of the AO is silent on this issue. AO has not reduced the amount of deferred tax of Rs. 19,43,32,844/- credited to P&L Account before arriving the figure of book profit. So, this ground of the assessee is allowed. AO should allow deferred tax of Rs. 19,43,32,844/-before arriving the figure of book profit. 10. Next ground of appeal is of not considering the amount of unabsorbed depreciation and business losses related to A.Y.2010-11 and 2011-12 as per the Audited Financials of the respective previous
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years relevant to those assessmentyears. The issue has been considered. The assessee had contented this in its submission dated 02.04.2021 at para 13. The figures of loss taken by AO for A.Y.2010-11 and 2011-12 were Rs. 1,70,97,065/- and Rs.9,33,80,369/- respectively. However, the correct figures as per the contention of the assessee were Rs. 1,76,62,341/- and Rs.9,33,94,526/-. So, the correct figures reported by the assessee were slightly higher. Assessee in the support of the claim had and has enclosed annexure-6 which is copy of audited Profit and Loss Account for F.Y.2010-11. AO has not given any comment upon this, in his order. The figures mentioned by the assessee are correct as per P & L A/c. So, this ground of the assessee is also allowed. AO should allow the claim of the assessee as stated above. 11. Third ground of appeal is about calculation of lesser amount of aggregate losses from AY 2010- 11 to 2013-14 by Rs. 14,70,607/-. As already discussed above which dealing with ground no. 2. AO has calculated the amount of aggregate losses for AY 2010-11 and 2011-12 less by Rs.5,65,276/- and Rs. 14,157/- respectively. From perusal of the table at para 3 of the Order u/s 154, it is found that for A.Y.2014- 15 figure i.e. Rs. 14,70,607/- rather than being added with the figure of Rs.92,21,465/- in column 3 has been subtracted and arrived at Rs.9,07,44,078 at column 4. So, net loss for 2014-15 has been calculated at a reduced figure of Rs. 14,70,607/-. The contention of the assessee is correct and this ground is also allowed. AO should rectify the mistake. 8. Being aggrieved by the order of the ld. CIT-A, the Revenue is in appeal before us.
The learned DR before us reiterated the findings contained in the order passed under section 154 of the Act.
On the other hand, the ld. AR before us filed a paper book running from pages 1 to 19 and vehemently supported the order of the Ld. CIT-A.
We have heard the rival contentions of both the parties and perused the materials available on record. The explanation 1 to section 115 JB of the Act deals with the calculation of the book profit. The sub clause (viii) of explanation 1 to section 115JB of the Act requires that if any amount is credited to the profit and loss account by the amount of deferred tax, then the same should be reduced from the amount of profit shown by the assessee in the profit and loss account to work-out the book profit. On perusal of the profit and loss account, we note that the assessee has credited its profit and loss account with the amount of deferred tax of Rs. 19,43,32,844/- which the AO has not adjusted while calculating the profit. Accordingly, we hold that such adjustment has been made correctly by the ld. CIT-A.
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11.1 Regarding the amount of brought forward losses, we find that the AO has taken such losses at Rs. 1,70,97,065.00 and Rs. 9,33,80,369.00 respectively pertaining to the AYs 2010-11 and 2011-12 whereas the correct amount of losses as evident from the income tax return placed on page 12 of the PB stands at Rs. 1,76,62,341.00 and 9,33,94,525.00 respectively. Accordingly, we do not find any infirmity in the adjustment made by ld. CIT-A.
11.2 Moving further, we note that the AO has also wrongly reduced the amount of positive income of Rs. 14,70,607.00 pertaining to the AY 2014-15 whereas the same was adjusted against the unabsorbed depreciation. As such the amount of loss shown by the assessee shall remain the same. Accordingly, we hold that such adjustment has been made correctly by the ld. CIT-A.
11.3 If the above adjustments are made while calculating the book profit of the assessee under section 115JB of the Act, we find that there comes book profit at Rs. NIL which has been correctly determined by ld. CIT-A. Accordingly, we do not find any reason to interfere in the finding given by the ld. CIT-A. Hence, the ground of appeal of the revenue is hereby dismissed.
In the result, the appeal filed by the Revenue is hereby dismissed.
Order pronounced in the Court on 03/01/2024 at Ahmedabad. Sd/- Sd/- Sd/- (SIDDHARTHA NAUTIYAL) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER (True Copy) Ahmedabad; Dated 03/01/2024 Manish