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TMI Blog2020 (6) TMI 365X X X X Extracts X X X X X X X X Extracts X X X X ..... consequential MAT at Rs. 11,79,470/--, as against both being at Rs. Nil as calculated by the Appellant. 2. Dismissing the second ground whereby the Appellant had challenged the action of the AO in not mentioning anything about the carry forward of the returned, undisputed (and assessed) business loss and unabsorbed depreciation to the succeeding year(s), i.e. to A.Y. 2015-16 and onwards. While doing this, she completely misunderstood the facts of the case and observed that since the AO has clearly mentioned at para 3.13 about the Appellant not being allowed to carry forward unabsorbed depreciation and business loss, there is no substance in this ground. The Appellant submits that what was so mentioned by the AO in this regard was clearly and expressly in connection with quantification of Book Profit and not in connection with allowing the carry forward of the assessed unabsorbed depreciation and business loss to the succeeding year(s). 2. The 1st issue raised by the assessee is that the learned CIT (A) erred in not allowing the adjustment of lower of the unabsorbed depreciation or business losses while calculating book profit under MAT provision. 3. Briefly stated facts are tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purpose of ascertaining the MAT liability under section 115JB of the Act. The same was based on a Certificate in the prescribed form issued by the Chartered Accountant. As per this calculation, the book profit stood at Rs.Nil, thus not warranting any tax payment under section 115JB of the Act. 2. In the consequential assessment order passed, the AO did not accept the correctness of the MAT calculation as stated above. He did this by observing that since the brought forward loss and unabsorbed depreciation of the immediately preceding two years were adjusted against the higher amount of credit balance of still earlier years which was originally lying under the group of reserves and surplus, nothing remained unabsorbed and the adjustment of the lower of the two in calculation of book profit in the succeeding year was thus not permissible. The AO accordingly recalculated the book profit at Rs. 63,75,513/- (a sum of Rs. 42,39,463/- as appearing in the profit and loss account, as increased by Rs,21,36,050//- debited to the same towards deferred tax liability) while passing the assessment order. The first appellate authority confirmed this action for the reason stated in the body of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orollary applicable in the subsequent years, the Appellant voluntarily revised its returns of income for A.Ys. 2013-14 and 2014-15 and correspondingly claimed the proportionate deductions of the plot development fees. 6. In view of what is stated above and in so far as the year under appeal is concerned, the revised returned income turned out to be of (-)Rs. 3,16,27,011/-, as against the corresponding positive profit of Rs. 42,39,463/- as per the audited profit and loss account. No revision of the audited annual accounts was however possible which did not have corresponding debit in the profit and loss account towards plot development fees in view of this having been charged to revenue in full in earlier years, as stated above. 7. As a result of what is stated above, the book profit of the Appellant remained substantially lower in comparison to the corresponding assessed income in so far as A.Ys. 2012-13 and 2013-14 are concerned. This position got reversed in the later years, especially in A.Y. 2014- 15, when the book profit was proportionately higher, in view of there being no debit of the above referred deduction of plot development fees, in comparison to the corresponding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ciation suffered in later years would thus have been disclosed as such not only in the books of account but also in the audited annual accounts drawn therefrom. In such a hypothetical situation, the Revenue probably would not have any reason to draw any adverse as done by it in the present case. 11.1 Without prejudice, the Appellant further submits that Clause (iii) of Explanation 1 to section 115JB(2) of the Act mentions about the book profit to be reduced by the amount of loss brought forward or unabsorbed depreciation, whichever is less, as per books of account .... This Clause does not state that the same is required to be reduced by the lower of such loss and unabsorbed depreciation which may be appearing in the balance sheet. The Appellant submits that the term 'balance sheet' cannot be equated with the term 'books of account'. The same in fact is part of 'financial statement', as separately defined in the Companies Act 2013 and as further clarified at paragraph 11.2 below. In view of this, it is clear that the balance sheet is only the summarized presentation of the outstanding balances under various heads as on the reporting date and that too, af ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nterpreted by considering this aspect as well. 11.4 On legal side, reliance in this regard is placed on the ratio of the judgment delivered by Hon'ble Madras High Court in the case of CIT vs. Taj Borewells, as reported at (2007) 291 ITR 232, wherein the aforementioned view has been taken. Relevant portion of this judgment is reproduced herein below for the sake of convenience: "12. So, books of account is defined as any book which forms an integral part of a system of book keeping employed in any particular business and consequently includes both the ledger and the books of original entry. The profit and loss account of a trade is the statement -wherein the various items of profit and revenue on the one hand and the losses and expenditure on the other hand, are collected and offset, the one class against the other, that is, in compiling such an account being debit all the losses, credit all the gains. The resulting balance of this account represents the net profits or the net losses for the period under review. The object of a profit and loss account is to ascertain the income of a business and by offsetting the expenses of earning that income, to ascertain met increase (pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt and ITAT Mumbai respectively is clearly ill-founded as clarified hereunder: 14.2 In so far as the reliance of the AO on the judgment of Hon'ble Madras High Court in the case of CIT vs. Madras Fertilizers Ltd., as reported at (2013) 33 taxmann.com 623, is concerned, the same clearly does not have any binding force for two reasons: (i) this judgment involves the issue of interpretation of the provisions of section 115J, whereas the issue under consideration is in connection with the interpretation of section 115JB of the Act; and (ii) this judgment also does not have any binding force because of a contrary view having already been expressed none other than by Hon'ble Territorial Gujarat High Court at a later point of time in the case of Surat Textile Mills Ltd. (supra) and that too, directly in connection with the provisions of section 115JB of the Act. 14.3 Similarly, even the judgment of Hon'ble ITAT Mumbai in the case of KFA Corporation Ltd. vs. JCIT delivered in ITA No.5147/Mum-2002, which has been relied upon by the AO, clearly does not have any binding force either, in view of the same having been delivered by a judicial authority sub-ordinate to the High C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngly, the AO determined the book profit at Rs. 63,75,513/- and computed MAT liability for Rs. 11,79,470/- under the provisions of section 115JB of the Act. The view taken by the AO was subsequently confirmed by the learned CIT (A). 7.1 The provisions specified under clause (iii) of explanation 1 to section 115 JB of the Act, has a direct bearing on the issue on hand which reads as under: 115JB. (1)************ (2) ***************** Explanation 98[1].-For the purposes of this section, "book profit" means the net profit as shown in the profit and loss account for the relevant previous year prepared under sub-section (2), as increased by- ********** any amount referred to in clauses (a) to (i) is debited to the profit and loss account or if any amount referred to in clause (j) is not credited to the profit and loss account, and as reduced by,-]]] [(i) ********** (ii) *********** (iia) ******* (iib) *********** (iii) the amount of loss brought forward or unabsorbed depreciation, whichever is less as per books of account. Explanation.-For the purposes of this clause,- (a) the loss shall not include depreciation; (b) the provisions of this clause shall not appl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... credit all the gains. The resulting balance of this account represents the net profits or the net losses for the period under review. The object of a profit and loss account is to ascertain the income of a business and by offsetting the expenses of earning that income, to ascertain the net increase (profit) or decrease (loss) in the traders' "net worth" for the period. The balance-sheet lists the assets and liabilities and equity accounts of the company. It is prepared "as on" a particular day and the accounts reflect the balances that existed at the close of business on that day. By following the judgment of the Madras High Court cited supra and taking note of the definition of the books or books of account in the Income-tax Act as well as in P. Ramanatha Aiyar's Advanced Law Lexicon, 3rd Edition 2005, and also the meaning of the profit and loss account and balance-sheet, we can safely conclude that the profit and loss account and the balance-sheet are not books of account as contemplated under the provisions of the Act. Learned standing counsel for the Revenue has not placed any authority or any case law or any other material or evidence to show that the books of account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Legislature is to be judged from the language used in the legislation. If the language is plain and unambiguous, effect is to be given without going behind the wisdom of the Legislature and also regardless of the result. Therefore, the decision of the Tribunal was correct in law. [Para 17]" 7.5 We are also of the view that the amount of losses incurred by the assessee for the previous year's 2012-13 and 2011-12 should be set off against the future income in the manner as specified under section 115 JB of the Act. Thus we hold that the assessee has rightly reduced the amount of income for the year under consideration from the brought forward losses/unabsorbed depreciation pertaining to the previous year's 2012-13 and 2011-12. Accordingly, we are not convinced with the finding of the authorities below. Accordingly we set aside the order of the learned CIT (A) and direct the AO not to levy the tax under the provisions of MAT. Hence the ground of appeal of the assessee is allowed. 8. The 2ndIssue raised by the assessee is that the learned CIT (A) erred in confirming the order of the AO by holding that the amount of business loss and unabsorbed depreciation pertaining to th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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