GREAVES COTTON LTD (FORMERLY KNOWN AS GREAVES LTD),MUMBAI vs. ITO WD 6(3)(1), MUMBAI

The aforesaid appeal has been filed by the assessee against impugned order dated 24.08.2011, passed by CIT(A) -15, Mumbai for the quantum of assessment passed u/s 143(3) for the assessment year 2004-05. In various grounds of appeal, the assessee has challenged following additions/disallowances :-

The assessee is a Public Limited Company engaged in the business of manufacture and sale of marine and industrial gear boxes, diesel engines, generating sets, Tandem Rollers, Transit

The first issue raised vide ground no. A is enhancement of disallowance u/s 14A made by CIT(A).

The brief facts are that the assessee has earned following exempt income during the previous year; (a) dividend income of Rs. 28,56,000/- and (b) interest on tax free bonds of Rs. 21,000/- and Rs. 5,90,825/-. In response to the show cause notice as to why the expenditure attributable to earning of exempt income should not be disallowed, the assessee submitted that, firstly, the dividend received on shares were from the investment made in shares of Griever Morgwite Crucible Ltd., which was purchased long time back out of assessee’s own funds. Similarly, the investment in UTI Bonds and Kokan Railway Bonds were also made from assessee’s own funds. Hence, no expenditure can be said to have been incurred or can be attributed for the purpose of making these investments, especially no interest expenditure can be disallowed. The AO noted that similar submissions were made by the assessee during the course of assessment proceedings for the AYs 2001-02, 2002-03 & 2003-04, wherein 5% of the exempt income was treated as expenditure disallowable u/s 14A and accordingly, he made the disallowance of Rs. 1,73,364/- being 5% of the total exempt income of Rs. 34,67,285/- Besides this, he further made the disallowance of Demat charges of Rs. 8,25,010/- debited under the head “other sundry expenses” which was a direct expenditure. Accordingly, aggregate disallowance of Rs. 9,98,374/- was made.

In the first appellate proceedings, Ld. CIT(A) held that the assessee’s contention that no disallowance is called for cannot be accepted. Although he held that Rule 8D is not applicable, however, he proposed to make the disallowance by adopting the following method/formula :-

Before us, Ld. Counsel Ms. Aarti Vissanji, submitted that though CIT(A) has not mentioned about Rule 8D while making the enhancement, however, his method is exactly similar to the formula prescribed in Rule 8D which is untenable in law for the period prior to 2008-09. She further submitted that so far as the interest disallowance is concerned, the same cannot be made in the case of the assessee, because the investments which have yielded exempt income were made out of assessee’s own funds and which fact has been accepted by the AO not only in this year but also by the AO and CIT(A) in the earlier years. The Tribunal in assessee’s own case for the AY 1999-2000 has noted the fact that investments were made at Rs. 39.02 crores, whereas, the 5 Greaves Cotton Ltd. (formerly Greaves Ltd) Rs. 85.5 crores. In AY 2002- 03, no disallowance of interest was made and this fact has been accepted till the stage of the Tribunal. In any case, now this issue stands covered by decision of jurisdictional High Court in the case of CIT vs HDFC Bank, 366 ITR 505 and Delhi High Court in the case of Taikisha Engineering, 370 ITR 338.

On the other hand, Ld. CIT DR, submitted that the Ld. CIT(A) has only tried to work out a reasonable basis for disallowance for which he has taken a same clue from formula laid down in Rule 8D. It is the onus of the assessee to prove the nexus between the investment made and interest free funds and also the expenditures debited in the P&L Account. In support of his contention he relied upon the decision of Delhi High Court in the case of Maxbopp Investments, 347 ITR 272 and drew our specific attention to para 24 & 25 of the judgment.

We have considered the rival contentions and also perused the relevant finding given in the impugned order as well as material referred to before us. The Ld. CIT(A) has enhanced the disallowance u/s 14A to Rs. 3,25,89,130/- as against the disallowance made by the AO at Rs. 9,98,374/-.The formula adopted by the Ld. CIT(A) for making the disallowance u/s 14A is quite akin to formula laid down in Rule 8D which admittedly cannot be held to be applicable at all in the AY 2004-05. What could be the reasonable basis for disallowance has to be worked out from the nature of expenses debited and overall accounts of the assessee. So far as disallowance of interest expenditure is concerned, in the case of the assessee it is an admitted fact, permeating from the earlier years that the investments which have yielded exempt income were out of assessee’s own funds and no interest bearing funds were diverted for making the investments. Once that is so, then in view of the ratio laid down by the Hon’ble jurisdictional High Court in the case of CIT vs HDFC Bank (supra),

Second issue relates to disallowance of professional fees of Rs. 1,18,350/-, paid to ‘Majumdar and Co.’ for registration of copy rights of designs and engines which has been claimed as revenue expenditure by the assessee.

The AO has treated the said expenditure to be capital in nature as the same is covered u/s 32. The assessee’s case was that the payment was made for protecting the company’s business for registering the copyright of the products made/ manufactured by the assessee. Alternatively, it was pleaded that if it is treated as capital expenditure then depreciation @ 25% should be allowed.

The Ld. CIT(A) rejected the assessee’s contention on the ground that the expenditure has been incurred for getting the designs patented which adds to the value of the new asset which has an enduring benefit and accordingly, it is capital in nature.

After considering the rival contentions and on perusal of the impugned orders, it is an undisputed fact that payment has been made for getting the engine designs patented, which the assessee produces/manufactures. Such a copyright and patent will only go 7 Greaves Cotton Ltd. (formerly Greaves Ltd) to enhance the cost of such an intangible asset and accordingly, it has been rightly disallowed as capital expenditure by the Ld. AO and CIT(A). However, we agree with the alternate contention of the Ld. Counsel that if it is treated as capital expenditure for a capital asset then, depreciation has to be allowed on such an intangible asset, which specifically finds mention in section 32(1)(ii). Accordingly, we direct the AO to allow depreciation as per relevant rules provisions on such a capital expenditure. Accordingly, ground no. B is treated as partly allowed.

As regards ground no. C relating to addition on account of contribution to employees welfare fund of Rs. 1,73,543/-. It has been admitted by the Ld. Counsel that this issue has been decided against the assessee by the Tribunal in AY 2003-04. On perusal of the Tribunal order for the AY 2003-04. We find that this issue has been dealt in detail by the Tribunal in the following manner : 10. The issue raised in ground No.4 of the assessee’s appeal relates to the disallowance of Rs.1,70,218/- made by the AO and confirmed by the learned CIT(Appeals) on account of contributions made by the assessee to various funds by invoking the provisions of section 40A(9).

Contribution to Superannuation fund 6,232 (not recognized) Petrol Engine Unit,Thoraipakkam ------------------ Total 1,70,218/- __________ According to the AO, none of the above funds was covered u/s 36(1)(iv) or section 36(1)(v) and there being nothing to show that the contributions made by the assessee to the said funds was as per the requirement of any law, he therefore, disallowed the entire amount paid by the assessee as contributions to the various funds by invoking the provisions of section 40A(9). Before the learned CIT(Appeals), it was submitted by the assessee that all the contributions made to the various funds other than the contributions to unrecognized superannuation funds were as per the agreement with workers’ union and since the same was done as per the Industrial Dispute Act, 1947, the provisions of section 40A(9) were not applicable. The learned CIT(Appeals), however, did not find merit in these contentions of the assessee. According to him, all the contributions having been made by the assessee to non statutory funds, the same were not eligible for deduction in view of the express provisions contained in section 40A(9). 12. We have heard the arguments of both the sides on this issue and also perused the relevant material on record. The learned counsel for the assessee has reiterated before us the submissions made before he learned CIT(Appeals) to the effect that most of the contributions having been made by the assessee as per the settlement arrived at with the workers’ union, the same are covered by the Industrial Dispute Act, 1947 and provisions of section 40A(9) of the Act cannot be invoked. However, she has not been able to produce any evidence in the form of the copy of agreement with the workers’ union to support and substantiate her stand taken on this issue and in the absence of the same, we find

Next issue raised vide ground no. D is disallowance of various payments on the ground of infraction of law. The details of such payments were under :

Before the CIT(A), assessee contended that these payments are neither for penalties nor on account of any infringement of law. Relevant submission with regard to such payment made before the CIT(A) were as under : “(i) Charges of Rs. 9,650/- paid for late payment to Corporation of Chennai towards Health License is not punitive one but compensatory and is allowable as business expenditure.

After considering the submissions made by the parties and also the relevant findings given in the impugned orders, we find that so far as late payment of fee to Chennai Municipal Corporation is concerned it is on account of late payment of Health License, it is not for any kind of penalty or infraction of law. Accordingly, the payment made to Chennai Municipal Corporation is treated as business expenditure. As regards the payment on account of sales tax, it was due to technical error wherein assessee has stated that the destination of consignee as Indore despite the fact that name of consignee, destination and address were correctly written. This again cannot held to be in the nature of penalty or infraction of law. Next, amount of charges of Rs. 32,000/- for compliance of Weights and Measures is not for any violation which can be suggestive of any infringement of law, hence

Next issue relates to disallowance of claim of deduction of R & D expenses of Rs. 6,48,912/-.

The assessee has incurred capital expenditure of Rs. 6,48,912/- for the research of multipurpose light engine Units, which was claimed as deduction allowable u/s 35. Since assessee’s core product are engines, therefore, the assessee has to necessarily carry out research and development for developing efficient engines to stay in market and business. The assessee had decided to develop world class multipurpose engines and for this purpose it embarked upon “Avatar Project” and incurred expenses on technical expert advice, project materials and fees for Technical advisory services. The said project was to be completed in AY 2007-08 and sample products was also tested. Accordingly, the expenditure incurred on such a project was claimed as deduction u/s 35(1)(iv) r.w. sub-section (2)(ia). The Ld. CIT(A) and AO held that since the Auditors have mentioned “nil” amount against the deduction allowable u/s 35D, which means that nothing is qualified for deduction u/s 35.

Before us, the Ld. Counsel submitted that all the details were furnished regarding expenses incurred for R & D purpose for the “Avatar Project”. Once that is so, then even, if the Auditors

After considering the rival submissions and on perusal of the impugned orders, it is seen that assessee has taken a plea that it had incurred expenditure on research and development for developing a world class multipurpose engine for which it has embarked on “Avatar Project”, which got completed in AY 2007-08

In ground no. F, the assessee has challenged the addition on account of unutilized CENVAT credit of Rs. 1,44,14,614/-.

The AO has made addition on account of unutilized CENVAT credit on the ground that the assessee is following exclusive method of valuation of closing stock and it is contrary to the provisions of section 145A. When assessee is following exclusive method of valuation then while making the adjustment u/s 145A it will be mandatory to increase the valuation of closing stock of inputs by the debit balance of CENVAT credit available account appearing on the asset side of the Balance sheet. It should be further increased by SINVAT credit of raw material utilized in payment of duty of finished goods. The assessee’s case before the authorities below was that, it has been following the consistent method of account for valuing the inventory. If addition of CENVAT amount is added to the closing stock, then it would distort the real profit and will disturb the consistency in valuation of inventory. Heavy reliance was placed on the decision of Hon’ble Supreme Court in the case of Indo Nippon Chemicals, 261 ITR 275. The Ld. CIT(A), held that if any adjustment is made on account of unutilized CENVAT credit in the closing stock then proper effect of section 145A should be given and corresponding adjustment is to be made in the opening stock. For coming to this conclusion, he relied upon the decision of Bombay High Court in the case of CIT

Before us, the Ld. Counsel merely submitted that the full effect of section 145A has to be given and purchases made during the year should also be given effect to.

After going through the relevant finding given in the impugned order, we find that the Ld. CIT(A) has rightly directed the AO to make corresponding adjustment of CENVAT credit in the opening stock also in accordance with the decision of jurisdictional High Court. However, the Ld. CIT(A) has not referred to purchases made during the year as similar treatment has to be given for the purchases also. Accordingly, we direct the AO to give effect of adjustment in the purchases made during the year and work out the relief. Thus ground no. F is treated as partly allowed for statistical purposes.

As regards, the issue in ground G with regard to the interest waiver of CIT(A) Rs. 10,14,94,385/-, the addition has been made by the AO on the ground that CBDT has not any issued certificate till date on waiver application filed by the assessee u/s 41(1) as per the order of the BIFR. The assessee has shown an amount of Rs. 10,14,94,385/- on account of interest waived by the bank as taxable, however, in the loss shown in the return, the said amount was not reduced. The reason being, the assessee had filed an application before the CBDT seeking exemption u/s 41(1) for the waiver of interest.

The CIT(A) has confirmed the said addition on the ground that CBDT has not issued any certificate till date. The Ld. Counsel submitted that suitable direction should be given that, as and when the CBDT grants certificate, then effect should be given.

We agree with such a proposition of Ld. Counsel that, as and when certificate is issued by the CBDT then corresponding effect

Next issue raised vide ground no. H is addition on account of transfer pricing adjustment of Rs. 1,23,86,407/- in respect of import made from AEs, based on internal comparable transaction with another AE.

The assessee has undertaken transaction of import purchase of “kits and spares” from its two AEs namely, BOMAG GmbH, Germany (BOMAG) and CIFA Spa, Italy (CIFA) for sums amounting to Rs. 5,56,07,570/- and Rs.6,80,36,363/- respectively. For the purpose of benchmarking the arms length price on these international transaction, the assessee adopted ‘Resale Price Method’ (RPM) as the most appropriate method and has taken external comparables by adopting Profit Before Tax (PBT)/net sales. The assessee’s margin on such gross import was declared at 11.75% with BOMAG GmbH, 5.25% with CIFA the average of which was arrived at 8.53%. The details of sales, profit and gross margin are as order :- CIFA % BOMAG % Sales 19,05,60,100 100 16,09,81,100 100 Less: Imports (international transaction) 6,80,36,363 35.70 5,56,07,570 34.54 Gross Profit of International Transaction 12,25,23,737 64.30 10,53,73,530 65.46 Less: Indigenous cost (Local transactions) 11,24,62,164 59.02 8,54,09,950 53.69 Total Gross Profit 1,00,61,573 5.28 1,89,63,574 11.78 The gross margin of external comparables i.e. L & T Ltd., at 7.42% and Ingersoll India Rand Ltd. was 6.6%. Hence it was stated that,

However, the Ld. TPO observed that assessee is showing its transfer pricing result by adopting TNMM to justify the margins. He also rejected the external comparables selected by the assessee. He further observed that since assessee is carrying out transaction with 2 AEs, therefore, there is an internal comparability and if internal RPM is applied and gross margin of BOMAG GmbH, Germany which was at 11.7% and transaction with SIFA Spa, Italy, which was 5.28% is applied to benchmark the assessee’s margin, then it can be seen that there is huge variation and therefore adjustments has to be made. Thus, he held that 11.78% should be taken as arm’s length gross profit margin for benchmarking the margin with SIFA Spa, Italy. Accordingly, an adjustment of Rs. 1,23,86,407 was made on account of transaction with SIFA Spa, Italy.

Before the CIT(A), the assessee clarified that it has adopted RPM as most appropriate method for benchmarking the import transaction with its two AEs and had not resorted to TNMM as observed by TPO. Regarding two external comparables, the assessee submitted that segmental result of L&T are comparable with the assessee and it was found so in the earlier years, wherein it was held to be as a good comparable. Further, the assessee imports Tailor made spare components and the imported items purchased from AE are not sold in the Indian market. The assessee imports from BOMAG GmbH, Germany tailored made spares, components and kits for manufacture of Tandem Rollers and Vibratory Compactors and similarly, the imports from CIFA, Italy are also tailor made components and kits for manufacture of transit /Concrete Mixtures. Both these items are used for infrastructural equipments like road construction equipments and 17 Greaves Cotton Ltd. (formerly Greaves Ltd) transit mixture for supplying concrete mixture. Since two external comparables selected by the assessee were also dealing in infrastructural activity, therefore, same were taken as external comparables. The assessee detailed submission giving point-wise rebuttal of TPO’s finding has been incorporated by the CIT(A) from pages 40 to 44 of the appellate order. However, Ld. CIT(A), confirmed the action of the TPO as per discussion appearing in para 18.2.3 from pages 45 to 48 of the appellate order on the ground that, firstly, the computation of gross profit submitted by the assessee has not found to be correct on facts and also as per the accounting practice; secondly, internal comparability resorted to by the TPO has not been disputed by the assessee and lastly, the assessee has not identified external comparability and therefore, the internal comparability resorted by the TPO is fully justified.

Before us, the Ld. Counsel Ms. Aarti Vissanji submitted that, first of all, the internal comparability resorted by TPO and confirmed by CIT(A) is incorrect on facts and also under the transfer pricing regulation given in Rule 10B. The two transactions with the AE cannot be compared, because both are controlled transactions and any comparability for benchmarking arm’s length price has to be done by uncontrolled transactions. Thus, she submitted that entire determination of arm’s length price submitted by the AO is erroneous. She further submitted that external comparables, as submitted by the assessee should be adopted and in case of L & T, the same has held to be a good comparable in the earlier year, which has been upheld by the Tribunal also, therefore, TPO should be directed to accept the assessee’s external comparables.

On the other hand Ld. DR, argued that it is not in dispute that Resale Price Method (RPM) should be adopted and PLI should be the gross margin. If there are no internal comparables having uncontrolled transactions then matter should be restored back to 18 Greaves Cotton Ltd. (formerly Greaves Ltd) TPO for carrying out fresh comparability analysis by selecting external comparables, to benchmark the gross margins.

We have considered the rival submissions also perused relevant finding in the impugned orders. The transfer pricing adjustment has been made in relation to the import of spare part and equipments made from one AE, with the margin made from similar transaction with another AE. Thus, the comparability analysis as made by the AO/TPO and confirmed by CIT(A) by comparing two uncontrolled transactions, cannot be sustained. Under the transfer pricing regulations, a comparability analysis is a comparison of a controlled transaction with uncontrolled transaction and they are comparable if none of the difference between transactions could effect the factors like price or margin. If there are some differences then a reasonable accurate adjustment can be made to eliminate the material effect of any such difference. Here in this case, it is an undisputed fact that RPM should be adopted as Most Appropriate Method, wherein the gross margins i.e. gross profit over the sales are earned in the transactions are compared between the related and unrelated parties for the determination of arm’s length price. The TPO has carried out comparative analysis by adopting internal transactions with two AEs, which are completely controlled and related party transactions, hence, such a comparability analysis at the threshold is liable to be rejected. Accordingly, the entire approach of the TPO as well as CIT(A) is rejected because appropriate comparison has to be made from comparable uncontrolled transaction with the third parties, if there are no uncontrolled internal transaction. The assessee has selected two comparables initially and later on added one more comparable i.e. Escorts Ltd. The turnover (in crores); segmental result plus percentage margin of the three comparables were as under :-

In ground no. I, the assessee has challenged carried forward losses and unabsorbed depreciation.

At the time of hearing, the Ld. Counsel submitted that this is a general ground and hence same is not pressed. Accordingly, ground I is not adjudicated upon.

In ground no. J, the assessee has challenged the computation of long-term-capital-gain on sale of flat held for more than 3 years.

Brief facts are that, the assessee has sold residential flats which were acquired prior to 5 years. As per the depreciation statement in the block of assets, residential building was shown at “nil”. Accordingly, the Assessing Officer treated gain on sale of these flats as short-term-capital-gain u/s 50. The assessee’s case before the authorities below was that since these flats were held for more than 5 years, hence held to be capital arising from sale of 20 Greaves Cotton Ltd. (formerly Greaves Ltd) flats were long-term capital gain. It was submitted that fiction created in section 50 is only to restricted to mode of computation of capital gain contained in sections 48 & 49 and does not apply to other provisions of the sections. Accordingly, assessee contended that the capital of Rs. 4,19,85,805/- should be treated as long- term-capital-gain and not short term. In support, the assessee had relied upon the decision of Bombay High Court in the case of [CIT v Ace Builders (P.) Ltd 281 ITR 210] and CIT v Legal Heir of Later Mrs. S R Pandit (ITA No. 775/2005 dated 30.08.2005). However, the Ld. CIT(A) rejected the assessee’s contention and affirmed the order of the AO.

Before us, the Ld. Counsel strongly relied upon, the decision of ITAT Mumbai Bench in the case of Smita Conductors Ltd. vs ACIT reported in [2015] 152 ITD 417 wherein the decision of Hon’ble Bombay High Court in the case of S A Builders Ltd. has been relied upon.

On the other hand Ld. DR submitted that section 50 is non- obstinate clause wherein it is deemed that an asset, which was part of the block of asset is deemed to be short-term-capital-gain. Thus, it has to be treated as short-term-capital-gain.

We have heard the rival contentions and also perused the relevant material on record. The deeming provisions as contained in section 50 is to be restricted only to the computation of capital gain, as held by Hon’ble Bombay High Court in the case of Ace Builders Pvt Ltd. (supra). Further, in the case of Smita Conductors Ltd., the Tribunal held as under :- Capital gain in case of the assessee has to be assessed as long term capital gain as the flat had been held by the assessee for more than three years. It has been argued that provisions of section 50 deeming the capital gain as short term capital gain is only for the purposes of section 48 and 49

Ground No. K, the assessee has challenged the addition to the book profit on account of extra ordinary items of Rs. 2,73,20,474/-.

In this regard, the assessee has filed a separate compilation of paper book with a petition for admissions of additional evidence and submitted that the same should be admitted and matter can be restored back for proper verification and adjudication. The relevant facts are that, the AO while calculating book profit u/s 115JB has made the addition of following extraordinary items as discussed in Schedule “T” note 11 of Audited Financial accounts, which are as under :- “R.1 Extraordinary item (Net) as described in Schedule T note 11 (i) The company obtained permission of Share holder Rs.37,90,00,000 On 25./2/2003 for disposal of RPRL undertaking under section 293(1)(a) of the Companies Act, 1956 through postal ballot. As per notice to the shareholders the directors estimated the sale value of the undertaking to be Rs. 11,00,00,000/-. Accordingly the Estimated loss of Rs. 37,90,00,000/- has been provided and disclosed as extra ordinary in the accounts

The assessee before us has now filed a computation of paper book containing additional and petition for admission of such additional evidences which are in the form of lease agreement dated 06.11.2003 and sale agreement dated 30th June 2004, both pertaining to RPRL Unit which was available on the date of the Balance Sheet for the relevant previous year. These additional evidence go to the very root of the issue involved and therefore, we are of the opinion that same should be admitted and this entire matter should be restored back to the file of the AO to examine these additional evidence and decide this issue afresh and in accordance with the provisions of the law. Accordingly, ground no. K is treated as allowed for statistical purposes.

In ground no. L, the assessee has challenged addition on account of revaluation of reserve of Rs. 6,80,317/- made in the book profits. The AO observed that assessee has reduced an amount of Rs. 6,80,317/- on account of transfer from revaluation reserve, from the book profit. This revaluation is allowed to be reduced from the book profit of the year, when the said provision was made, and has been increased by these reserve or provision as per the proviso to sub-clause (i) under Explanation to section 115JB(2). The AO observed that since no details or brief has filed therefore it is not allowed as deduction.

Before the CIT(A), the assessee submitted that the assessee has withdrawn to revaluation reserve sum of Rs. 6,80,317/- and credited to the P&L account and hence the same is to be reduced from book profit. Further, the audited account were available on the income-tax records, which shows the withdrawal made from revaluation reserve and simultaneously credit in the P&L account by deducting it from depreciation and hence such a withdrawal from revaluation should be reduced from the book profit. The Ld. CIT(A), however, uphold the action of the AO.

After hearing both the parties and on perusal of the material placed on record, it is seen that depreciation of Rs. 16,10,62,604/- has been reduced by the amount transferred from revaluation reserve and only the net depreciation has been debited i.e. Rs. 6,80,317/- and accordingly, this net depreciation which has been transferred and reduced from revaluation reserve credited to the P&L account, ought to be excluded. Accordingly, AO is directed to reduce the net amount of Rs. 6,80,317/- on account of depreciation from the book profit in view of Explanation (i) to section 115JB(2). Thus, ground no. I is treated as allowed.

Ground M, the assessee has claimed that deduction u/s 80HHC should be allowed in the working of MAT and the export profit as per the books to be reduced.

The AO in the assessment order held that since assessed profit and business profit, assessee is not eligible for deduction u/s 80HHC. The assessee’s case was that as per provisions of section 115JB, there is a book profit and therefore, the deduction for the purpose of eligible profit u/s 80HHC is to be worked out based on such book profit deducted as per explanation (iv) to section 115JB(2). However, the Ld. CIT(A) dismissed the assessee’s contention on the following ground :-

After hearing both the parties, we agree with the contention of the Ld. Counsel that the loss or depreciation should be adjusted as per the earlier/past MAT assessment i.e. the book profit determined by the AO in the earlier years and not as per the book figures. The assessee has given the working at page 368 of the paper book. Accordingly, the AO is directed to verify the working and give deduction of carried forward losses and unabsorbed depreciation on the basis of assessment completed by the AO under MAT in the earlier years. Accordingly, ground no. N is treated as allowed.