TMI Blog2008 (9) TMI 407X X X X Extracts X X X X X X X X Extracts X X X X ..... applicable under s. 115JB of the Act was also offered at Rs. nil, as according to the assessee the operating profit of the business has been adjusted against the carried forward loss. 3. The AO found that the assessee has set off an amount of Rs. 95,21,166 against the current year's book profit for the purpose of computing the taxable income under s. 115JB. The said amount consisted of two elements: carried forward business loss of Rs. 35,64,068 and unabsorbed depreciation of Rs. 59,57,098. The AO held that as per the provisions of s. 115JB, what is to be deducted from the positive book profit is the amount of loss brought forward or unabsorbed depreciation whichever is less as per books of account. The AO held that the assessee couldn't ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s earned, such a company should pay a minimum, tax though under the normal provisions of the IT Act after deductions, allowances and expenses, there may not be a tax liability. Sec. 205 of the Companies Act (sic-provided that) dividend to be declared from profit after providing for current year's depreciation and after setting off of un-provided for depreciation or earlier years' loss whichever is less. This concept has been brought into the provisions of s. 115JB. The Finance Minister in his Budget Speech while introducing the amended provisions of s. 115JB made a reference to these requirements under the Companies Act, i.e. the profit for distribution of dividend shall be current year's profit after setting off of unprovided for depreciat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ow the Explanation thereto, for set off of the amount only loss brought forward or unabsorbed depreciation, whichever is less as per books of account, has to be considered for computation of book profit under s. 115JB. Hence, the learned CIT(A) went wrong in his findings [Krishna Oil Extraction Ltd. vs. CIT (1998) 144 CTR (MP) 660 : (1998) 230 ITR 806 (MP) and CIT vs. Dynamic Orthopedics (P) Ltd. (2002) 176 CTR (Ker) 432 : (2002) 257 ITR 446 (Ker)]." 7. We heard Shri V.M. Thyagarajan, Departmental Representative, appearing for the Revenue and Shri P.K. Sasidharan, chartered accountant, appearing for the respondent-assessee. Sec. 115JB provides for special provision for payment of tax of certain companies. Those companies are by and large ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... why the Explanation says that the loss shall not include depreciation. It means the business loss and depreciation for the purpose of adjustment under s. 115JB have to be considered separately as independent items. The law further provides that what is to be adjusted by way of deduction is the amount of loss brought forward or unabsorbed depreciation, whichever is less. Therefore, it is crystal clear that an assessee could claim by way of deduction either the loss or depreciation whichever is less and not both. In the present case, the assessee has claimed both the brought forward loss and the unabsorbed depreciation, which is patently against the express provisions of law. In order to justify such a claim, the assessee has relied on the ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to look into whether there is a case for the assessee company to declare dividend or not. The observation of the CIT(A) in accepting the relevant contentions of the assessee are absolutely unwarranted. The law is very clear that either the amount of loss brought forward or unabsorbed depreciation whichever is less alone would be entitled for deduction. The law having been stated in clear terms, the CIT(A) has grossly erred in allowing the claim of the assessee in respect of both the brought forward loss and unabsorbed depreciation. The argument of the assessee that there is no concept of unabsorbed depreciation under the company law, is not relevant in the present context as the IT law has specifically recognized the concept of unabsorbed d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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