TMI Blog2022 (6) TMI 1012X X X X Extracts X X X X X X X X Extracts X X X X ..... omputing Book-Profits u/s 115JB - Book-Profits of these two years would be Nil. It is undisputed fact that the assessee was a sick company during both these years and was eligible to claim such deduction since sufficient documents, in that regard, has already been filed by the assessee during appellate proceedings and the same is also not under dispute. The logic of Ld. AO is that the Book-Profits of these two years, should first be adjusted by the amount of brought forward losses or depreciation as per clause (iii) and only thereafter, the profits should be reduced to nil as per Clause (vii). However, we find that this is not correct logic since profits of a sick company has specifically been excluded from the purview of Sec.115JB. The amount of brought forward business losses or depreciation would be allowable only when there is positive Book-Profits. Such positive Book-Profits start arising to the assessee only from year ending 31.03.2010 after it become non-sick company and accordingly, the adjustment of brought forward business losses or depreciation would start from that year only. The same is also supported by the fact that the assessee has accumulated losses of Rs.412 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss as per books, wherein it has been clearly established that the appellant has only claimed the lower of business loss or depreciation, loss as per the provisions of section 115JB(2)(iii) which reads as (iii) the amount of loss brought forward or unabsorbed depreciation, whichever is less as per books of accounts. Explanation: For the purpose of this clause, (a) the loss shall not include depreciation; (b) the provisions of this clause shall not apply if the amount of loss brought forward or unabsorbed depreciation is nil. 7. In view of the foregoing submissions, it is reiterated that the set off of the profit of those sick years against brought forward book loss on notional basis is not legally tenable and hence, the Assessing officer may kindly be directed to delete the addition made in this regard. As evident, the assessee is primarily aggrieved by computation of Book- Profits u/s 115JB. 2. The name of erstwhile assessee namely M/s Sumangala Spinning Mills Private Limited has been changed to M/s Kannappan Textile Mill Private Limited vide fresh certificate of incorporation issued by Registrar of Companies, Tamil Nadu on 21.02.2007. The copy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 31.03.2007 Under BIFR Under BIFR Under BIFR Under BIFR MAT Applicable (66,79,797) 2,07,43,254 15,69,483 92,87,604 (3,90,173) 62,75,000 11,84,135 26,88,816 (1,77,67,664) 19,67,828 (1,29,57,797) 1,95,59,119 (11,19,333) 2,70,55,268 (23,58,001) 62,75,000 - - - 3,90,173 31.03.2008 MAT Applicable 8,75,063 29,51,743 (20,76,680) - 31.03.2009 MAT Applicable (50,60,833) 91,91,713 1,42,52,546 50,60,833 31.03.2010 MAT Applicable 1,11,04,089 93,32,850 17,71,239 - 31.03.2011 MAT Applicable 1,61,90,211 98,70,801 63,19,410 - 31.03.2012 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mulated losses. Explanation,- For the purposes of this clause, net worth shall have the meaning assigned to it in clause (ga) of sub-section (I) of section 3 of the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of1986); or Accordingly, profits arising to the company when it was a Sick Company would not come under the scope of Section 115JB and therefore, the profits for both the years would not come under MAT provisions. 4.3 However, the explanation was held to be not acceptable since the assessee has not submitted any documentary proof that the company was under BIFR as claimed by the assessee for the said assessment years. Moreover, as per Section 115JB, the amounts of profits of sick industrial units can be deducted from the book profits for the computation of tax for the respective assessment years and it has not been mentioned that it is not to be considered for arriving cumulative book loss. Hence the assessee statement that the profits of the sick company would not at all come under MAT is not acceptable since only the profits of sick unit can be deducted for MAT purposes for arriving at tax for the particular year but not for arriving at cumula ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0,040/- is net-off of profit of the financial years ending on 31.03.2004 and 31.03.2006. 5.2 During appellate proceedings, the assessee also submitted the letter dated 25.02.2000 as received from BIFR registering it as Sick Industrial Company. The order of BIFR dated 28.08.2000 was also furnished wherein the assessee was declared as a sick company. Finally, on 11.12.2006 (Appeal No.40/2005), Appellate Authority for Industrial Financial Reconstruction (AAIFR) had ordered for deregistration of the company from the status of sick industrial company since net-worth of the company became positive. 5.3 However, Ld. CIT(A) held that as per Clause (vii) of Explanation-1 to Section 115JB, the amount of profits of Sick Industrial Company for the assessment year commencing on and from the assessment year relevant to previous year on which the company has been Sick Industrial Company and ending with assessment year during which the entire net worth become equal or exceeds the accumulated losses has to be reduced from the net profit for calculating the book profit the assessment year. The section does not mention that the amount of profit of a Sick Industrial Company should not be conside ..... X X X X Extracts X X X X X X X X Extracts X X X X
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