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TMI Blog2011 (5) TMI 657X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal. Having regard to the submissions made in the petition filed by the assessee seeking condonation of delay, we condone the delay and admit the appeal. 2. The issue urged before us relates to the computation of book profit under section 115JA of the Act, more particularly, the amount of deduction to be allowed against the clause (iii) of Explanation to sec. 115JA of the Act. Besides the above, the assessee is also contesting the interest charged under section 220(2) of the Act. 3. The facts relating to the issues are stated in brief. The assessee is a private limited company and since its total income for the year under consideration was less than 30% of the book profit, the deeming provisions of sec.115JA became applicable to the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the manner of adjustment of profit earned in the three years cited above. The assessee followed "First in First out" (FIFO) method for adjusting the profit, i.e. it adjusted the profit of a particular year against the loss of the earliest possible year. For example, the profit made for the year ending 31.3.95 was adjusted against the loss incurred for the year ending 31.3.88. In this way, the assessee bifurcated the accumulated loss as on 31.3.99 into business loss of Rs. 28,56,756/- and depreciation loss of Rs. 10,27,609/-. Accordingly, the assessee deducted Rs. 10,27,609/-, being the lower of business loss and depreciation under clause (iii), referred (supra). 3.1 It is pertinent to note that the assessee is before us in second round of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d accordingly deemed it fit to set aside the matter to the file of Assessing Officer in order to consider the said claim of the assessee. 3.2 The Assessing Officer, in the second round of proceeding, took support of the decision rendered by Learned CIT(A-II), Visakhapatnam in the case of Radhika Vegetable Oils (P.) Ltd. [IT Appeal Nos.47-48/R-4/VSP/04-05, dated 24-1-2006] for the assessment year 1998-99 and 1999-2000. In the above cited case, the Learned CIT(A) held that, in the absence of any specific provision in sec. 115JA with regard to the manner of set off of carry forward losses, the provisions of Income tax Act relating to carry forward and set off of losses would apply. He further held that as per the provisions of income tax Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 5. There cannot be any dispute that the manner of determination of "Net Profit" under accounting principles and the manner of determination of total income under Income tax Provisions are different. Under the companies Act, for accounting purposes, the loss of any year is not segregated into "Business loss" and "Depreciation loss". Only under the Income tax Act, the loss computed under the head "Profits and Gains of Business" is segregated into "Business Loss" and "Depreciation Loss". Since it is specifically provided in section 115JA that the loss shall not include depreciation, it becomes necessary to bifurcate the brought forward loss as per books of account into "Unabsorbed business loss" and "Unabsorbed depreciation". 6. Under Inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther provisions of this Act shall apply to every assessee, being a company, mentioned in this section." 8. As per clause (iii) of Explanation to section 115JA, "the amount of loss brought forward or unabsorbed depreciation which ever is less as per books of account" is required to be deducted from the net profit. There is no dispute that the amount to be deducted as per this clause has to be arrived from the books of account of the assessee. We have already noticed that the accountancy principles do not bifurcate the loss into "Business loss" and "Depreciation Loss". Only, by virtue of explanation to clause (iii), it is necessary to so segregate the loss. However, the said section does not provide for the manner of segregation of brought f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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