TMI Blog2020 (2) TMI 780X X X X Extracts X X X X X X X X Extracts X X X X ..... f accounts and hence, the invocation of revisionary jurisdiction u/s.263 of the Act by the ld. CIT deserves to be quashed and is hereby quashed. Accordingly, the grounds raised by the assessee are allowed. - ITA No.6727/Mum/2013 - - - Dated:- 4-2-2020 - Shri Mahavir Singh, JM And Shri M. Balaganesh, AM For the Assessee : Shri J.D. Mistry, Senior Advocate For the Revenue : Shri Awungshi Gimson, CIT DR ORDER PER M. BALAGANESH (A.M): This appeal in ITA No.6727/Mum/2013 for A.Y.2007-08 preferred by the order against the revision order of the ld. Commissioner of Income Tax-7, Mumbai u/s.263 of the Act dated 13/09/2013 for the A.Y.2007-08. 2. The only effective issue to be decided in this appeal is as to whether the ld. Administrative CIT was justified in invoking revisionary jurisdiction u/s.263 of the Act in the facts and circumstances of the case. 3. The brief facts of this appeal are that the return of income for the A.Y.2007-08 was filed by the assessee on 31/10/2007 declaring loss of ₹ 11,81,58,788/- under normal provisions of the Act and book profit of ₹ 9,34,95,939/- u/s. 115JB of the Act. The case was selected for scrutiny. The scr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gure of book profits' u/s. 115J8 of the income-tax Act. 1961. A copy of the working arriving at the figure of ₹ 6,77,29,000/- is forwarded herewith- refer Appendix - A . 2. The method of computation of brought forward business loss and unabsorbed depreciation adopted by the assessee has been a subject matter of dispute in the earlier years. 3. The method adopted by the assessee has been accepted by the Income-Tax Appellate Tribunal vide its Order dated 16 March 2011 passed for the Assessment Year 2004-05. A copy of the said Order is attached herewith - refer Appendix- B . 4. The same method has been consistently followed by the assessee even in the subsequent years including the Assessment Year 2007-08. 5. Hence the brought forward loss of ₹ 6,77,29,000/- has been correctly reduced from the 'book profits' for the year under consideration. 6. Here we would like to draw your Honour's attention to the fact that for the purposes of quantification of income tax liability u/s. 115JB. although the reduction form current year's profits to be made is the lesser of book deprecation or book loss brought forward from earlier years, y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1997-98 1479 0 1479 65 0 65 1998-99 1479 80803 0 82282 65 44142 0 44207 1999-2000 82282 201396 0 44207 267583 0 311790 2000-01 13835 283678 0 6591 283678 311790 7244 304546 2001-02 277087 0 0 277087 304564 37337 341883 2002-03 123048 277807 0 55083 277087 341883 0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re to arrive at the quantum of unabsorbed loss/depreciation for reduction as per clause (iii) of Explanation 1) to section 115 JB. 3.4. The CIT observed in pages 9 10 of his order as under:- Quite clearly, clause (iii) of Explanation 1 to section 1 15JB envisages adjustment for the amount of loss brought forward or unabsorbed depreciation, whichever is less as per books of account. It is quite clear that the loss depicted in the account books which comprises of business losses and depreciation is required to be for the purposes of clause (iii) of Explanation 1 to section 1 15JB (2). So, however, the manner of determining the individual figures of loss and depreciation is not clearly indicated in section 115JB in as much as the manner in which the losses and depreciation are set off against the profits has not been specifically spelt out. However, an indication which is manifested in section 115JB itself is a safe premise to follow in such a situation. Clause (iii) speaks of adjustment for the lower of brought forward loss or unabsorbed depreciation. Therefore, the Legislature envisaged that while computing book profits for 115JB, reduction be allowed for the lower ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 334033 0 0 0 0 349127 0 0 349127 2005-06 0 0 0 0 349127 160845 0 509972 2006-07 161224 0 0 509972 3.6. Based on the aforesaid table, the ld. CIT finally concluded that the aggregate amount of unabsorbed business loss brought forward to AY 2007-08 is Rs.NIL and the aggregate amount of unabsorbed depreciation brought forward to AY 2007-08 is ₹ 50,99,72.000/-. Accordingly, the provision of clause (iii) of Explanation (1) to section 115JB is not applicable as the amount of loss brought forward is Nil. Therefore, assessee is not eligible for any reduction as per clause (iii) of Explanation (1) to section 115JB of the Act. But assessee has claimed reduction of ₹ 6,77,29,000/- under clause (iiii) of Explanatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of business loss and depreciation loss during the year of set off i.e. during the year in which book profits has been made by the assessee. On this aspect of considering the cumulative figures, there is no dispute. We find that the assessee during the year of set off had sought to adjust the least of business loss or depreciation loss as per books of accounts on a proportionate basis with the business loss as well as with the depreciation loss instead of reducing the least of the entire business loss or depreciation loss as per books of accounts. This is the short dispute before us. We find the manner of set off of brought forward losses as per books of accounts either on year to year basis or on cumulative basis or on proportionate basis has not been spelt out anywhere in the provisions Section 115JB of the Act. Only the courts have interpreted the manner of set off of losses and had accordingly held that the same had to be done based on the least of accumulated figure of business loss or depreciation loss as per books of accounts. The fact of manner of set off of losses not being specified in provisions of Section 115JB of the Act is also accepted by the revenue in the written su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 154 of the Act. The assessee had claimed the set off ₹ 1,39,36,000 in terms of Explanation III (of (2) proviso to Section 164 JA (2) of the Act) as against the brought forward loss as per the books at ₹ 15,01,82,00/-. Thus, the matter related to the interpretation of the effect which is to be given to the aforesaid provision and, therefore, it was not a mistake which was to be corrected for which jurisdiction under Section 154 of the Act could be exercised, as held by the Apex Court in Apollo Tyres Vs. Commissioner of Income Tax, 255 ITR 273 and T.S. Balaram Income Tax Officer, Company Circle IV, Bombay Vs. M/s Volkart Brothers, 82 ITR 50. 7. We, thus do not find any merits in these appeals. No question of law arises. These appeals are accordingly dismissed. 5.1. Though the aforesaid decision was rendered in the context of Section 154 of the Act by the Hon ble Delhi High Court, the analogy drawn thereon could very well be applied to the impugned proceedings u/s.263 of the Act as the underlying principle based on which the Hon ble Delhi High Court rejected the plea of the revenue was that a possible view has been taken by the ld. AO and the issue in dis ..... 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