TMI Blog2008 (12) TMI 631X X X X Extracts X X X X X X X X Extracts X X X X ..... ion that the loss has arisen on the sale of shares in Indus Bank Ltd. held by Met Securities P. Ltd. which company was amalgamated with the assessee-company with effect from 1-4-1998 by the order of the High Court given on 23-11-1997. Since the said transaction of sale was effected by the amalgamated company and since the shares were held as stock-in-trade by that company the loss arisen out of that is treated as revenue loss. It was further submitted that the amalgamating company was dealing with securities and investments and as such the said shares were not held by that company as long-term investment. This aspect of the submissions were not accepted by the Assessing Officer and loss suffered by the amalgamating company was disallowed by the Assessing Officer. The same submissions were made before the learned CIT(A) and furnished copies of the accounts, Balance Sheet, etc. to the learned CIT(A) in support of its claim. The learned CIT(A), after examination of the Balance Sheet of the said amalgamating company, considered that the shares in Indus Bank Ltd. was held as long-term investment as on 31-3-1998 as against nil shares shown on 31-3-1997. He was of the opinion that on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome at the relevant point of time were examined by the Assessing Officer. It is not the case of the assessee that the loss is suffered by the amalgamated company. It is a loss suffered by the amalgamating company in their books. Since there is considerable gap between the conclusion of accounts and approval by the High Court the assessee would have filed the Returns for earlier years and assessment should have been done in the case of Metmin Securities Ltd. The nature of business activity undertaken by that company can be examined on the basis of the Return of Income filed by the assessee and to see whether the losses claimed were business loss or capital loss, either long-term or short-term. Since it is the submission of the assessee that the said amalgamating company is in the business of purchase and sale of shares the nature of transactions are to be examined with reference to the assessment records of the amalgamating company and accordingly a decision can be arrived at whether the loss is business loss or a capital loss. In case the amalgamating company is in the business of purchase and sale of shares the Assessing Officer can examine allowing the amounts as business loss, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re was no assets in the earlier years on which depreciation could be charged. Only during this year there was a debit of Rs. 41,868 as depreciation claimed. Now coming to the provisions of section 115JA(2) it was the submission of the learned counsel that since there is no unabsorbed depreciation in the books of the assessee-company provisions of section 115JA(2) does not directly apply as there is no unabsorbed depreciation to be compared and so the business losses are to be reduced as per the provisions. In support of the claim the learned counsel relied on ITAT Mumbai SMC Bench decision in the case of Hercules Holding (P.) Ltd. v. ITO [1996] 57 ITD 215 wherein the Hon ble Single Member has held as under : "A reading of the provisions of section 205 of the Companies Act suggests that no company could declare or pay any dividend without providing for the depreciation on the assets owned by it. It lays down a further restriction in case of carryover of losses from the earlier year or years, stating that the loss of the earlier year or years or the amount of depreciation provided in that or those years has to be compared with one another and the amount that is lesser of the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contained in any other provisions of this Act, where in the case of an assessee, being a company, the total income, as computed under this Act in respect of any previous year relevant to the assessment year commencing on or after the 1st day of April, 1997 [but before the 1st day of April, 2001] (hereafter in this section referred to as the relevant previous year) is less than thirty per cent of its book profit, the total income of such assessee chargeable to tax for the relevant previous year shall be deemed to be an amount equal to thirty per cent of such book profit. (2) Every assessee, being a company, shall, for the purposes of this section prepare its profit and loss account for the relevant previous year in accordance with the provisions of Parts II and III of Schedule VI to the Companies Act, 1956 (1 of 1956) : Provided , that while preparing profit and loss account, the depreciation shall be calculated on the same method and rates which have been adopted for calculating the depreciation for the purpose of preparing the profit and loss account laid before the company at its annual general meeting in accordance with the provisions of section 210 of the Companies Act, 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the amount of loss brought forward or unabsorbed depreciation is nil ; or] ( iv )the amount of profits derived by an industrial undertaking from the business of generation or generation and distribution of power; or ( v )the amount of profits derived by an industrial undertaking located in an industrially backward State or district as referred to in [sub-section (4) and sub-section (5) of section 80-IB], for the assessment years such industrial undertaking is eligible to claim a deduction of hundred per cent of the [profits and gains under sub-section (4) or sub-section (5) of section 80-IB or ( vi )the amount of profits derived by an industrial undertaking from the business of developing, maintaining and operating any infrastructure facility [as defined in the Explanation to sub-section (4) of section 80-IA and subject to fulfilling the conditions laid down in that sub-section]; or ( vii )the amount of profits of sick industrial company for the assessment year commencing from the assessment year relevant to the previous year in which the said company has become a sick industrial company under sub-section (1) of section 17 of the Sick Industrial Companies (Special Pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The contention of the learned counsel cannot be accepted for the simple reason that clause ( iii ) contemplates a comparison between amount of loss brought forwarded or unabsorbed depreciation. If either of the amount is nil or not available then comparison cannot be made, the provision cannot be invoked at all. Consequently looking at any way there cannot be any allowance of loss brought forward alone in the absence of any unabsorbed depreciation which is to be compared. The unabsorbed depreciation being at " nil " situation may include where there is no claim of depreciation at all, in which case also unabsorbed depreciation is to be taken at nil since there is no claim in the nature of depreciation and as per the Explanation the provisions of clause ( iii ) does not apply if either of the amount is nil, i.e., if the amount of loss brought forward or amount of unabsorbed depreciation is nil . Considering in any way the provision does not apply in the situation of the assessee and, therefore, we are of the opinion that the unabsorbed brought forward loss cannot be reduced from the net profit and computation being done under Explanation to section 115JA(2)( iii ). 18 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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