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2022 (6) TMI 1012 - AT - Income TaxComputation of profit u/s 115JB - scope of MAT provisions - inclusion/ exclusion of profits of sick industrial company - HELD THAT:- We find the As per Explanation-1 to Sec.115JB(2), ‘Book Profits’ means the profits as shown in the statement of Profit & Loss Account. This amount is to be increased and reduced by specified items. One of the items that is to be reduced, as per clause-(iii), is the amount of loss brought forward or deprecation whichever is less as per Books of Accounts. For the purpose of this clause, loss does not include depreciation. Further, the provision of this clause shall not apply in case the amount of brought forward loss or depreciation is ‘nil’. Another reduction as provided by Clause (vii) profits of sick industrial company would be reduced to arrive at Book Profits - Applying the provisions of clause (vii), we find that the assessee has earned book-profits of Rs.195.59 Lacs for the year ending 31.03.2004 and book-profits of Rs.270.55 Lacs for the year ending 31.03.2006 and accordingly, these profits would be reduced while computing Book-Profits u/s 115JB - Book-Profits of these two years would be Nil. It is undisputed fact that the assessee was a sick company during both these years and was eligible to claim such deduction since sufficient documents, in that regard, has already been filed by the assessee during appellate proceedings and the same is also not under dispute. The logic of Ld. AO is that the Book-Profits of these two years, should first be adjusted by the amount of brought forward losses or depreciation as per clause (iii) and only thereafter, the profits should be reduced to nil as per Clause (vii). However, we find that this is not correct logic since profits of a sick company has specifically been excluded from the purview of Sec.115JB. The amount of brought forward business losses or depreciation would be allowable only when there is positive Book-Profits. Such positive Book-Profits start arising to the assessee only from year ending 31.03.2010 after it become non-sick company and accordingly, the adjustment of brought forward business losses or depreciation would start from that year only. The same is also supported by the fact that the assessee has accumulated losses of Rs.412 Lacs in the books of Accounts which is net-off of profits for the year ending 31.03.2004 & 31.03.2006. Therefore, the assessee, in our opinion, has correctly adjusted the brought forward losses and depreciation as tabulated above and lower authorities are not justified in disturbing the same. Accordingly, we direct Ld. AO to grant this adjustment as claimed by the assessee during the year. Assessee appeal allowed.
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