Peerless Hospitex Hospital & Research Centre Ltd. Vs DCIT (ITAT Kolkata)
Conclusion: While computing book profit u/s 115JB, assessee company was entitled, to deduct the B/F business losses as the restriction, contained in Sec.72 of the I.T. Act on carrying forward the unabsorbed business losses for more than 8 years, did not apply in computing the Adjusted Book Profit u/s 115JB.
Held: In return of income filed by assessee company for A.Y. 2009-10, it had claimed deduction of Rs. 2,95,24,869/- in computation of MAT u/s 115JB, on verification of records it was seen that the amount claimed by assessee was related to the loss brought forward or unabsorbed depreciation for A.Y. 1996-97, 1997-98, 1998-99. As the unabsorbed loss arose more than 8 years back, therefore the claim of the assessee was not accepted by AO. It was held that section 115-JB was a stand-alone provision which did not contain any provision about carry forward of B/F losses, while computing the Book Profit u/s 115-JB. Audited accounts of the company clearly suggested that assessee had never adjusted the brought forward losses/debit balance of Profit and Loss account with the General Reserve. In view of the above, it was clear that the sum of Rs. 18,69,57,957/-credited in the General Reserve account was a Capital Receipt hence, it should not to be considered in computation of book profit u/s 115JB. AO had failed to take into account that the restriction, contained in Sec.72 of the I.T. Act on carrying forward the unabsorbed business losses for more than 8 years, did not apply in computing the Adjusted Book Profit u/s 115JB. Therefore, AO was directed to allow the claim of the assessee for adjusting the unabsorbed losses of Rs.2,95,24,689/- with the book profits under section 115-JB of the Act, for the year.
FULL TEXT OF THE ITAT JUDGEMENT
The captioned two appeals filed by the assessee, pertaining to assessment years 2009-10 and 2013-14, are directed against the separate orders passed by the learned Commissioner of Income Tax (Appeals)-4, Kolkata (in short the ld. ‘CIT(A)’], in appeal No. 525/CIT(A)-4/C-11/(2)/2015-16 and 1369/CIT(A)-4/C11(2)/15-16, which in turn arise out of separate assessment orders passed by the Assessing Officer u/s 154/ 251/ 143(3) of the Income Tax Act, 1961 ( in short the ‘Act’).
2. Since, the issues involved in these two appeals are common and identical; and these appeals pertain to the same assessee,therefore, these appeals have been clubbed and heard together and a consolidated order is being passed for the sake of convenience and brevity.
3. First we take assessee’s appeal in ITA No. 737/Kol/2018, for A.Y. 2009-10. The Grounds of appeal raised by the assessee are as follows:
1. That on different grounds both the Ld.A.O. and the Ld.CIT(A) erred in rejecting the assessee’s rectification petition claiming that in computing its Adjusted Book Profit for Asstt. Year 2009-10 in terms of Sec.115JB of the I.T.Act, its brought forward unabsorbed business losses relating to Asstt. Years 1996-97,1997-98 and 1998-99 totaling Rs.2,95,24,689/- should have been set off with its Net Profit as per its Profit & Loss Account for the said Assessment Year in terms of Explanation (iii) below Sec. 115JB of the I.T.Act.
2. That the Ld. A.O. erred in rejecting the assessee’s above-mentioned claim on the ground that since the unabsorbed business losses relating to Asstt. Years 1996-97,1997-98 and 1998-99 arose more than 8 years back, the said losses could not be set off with the Net Profit relating to Asstt. Year 2009-10.
2.(a) That while rejecting the assessee’s claim of set off of Brought forward unabsorbed business losses, the Ld. A.O. failed to take into account that the restriction, contained in Sec.72 of the I.T. Act on carrying forward the unabsorbed business losses for more than 8 years, does not apply in computing the Adjusted Book Profit u/s 115JB in view of the fact that Sec.l15JB(1) starts with the words “Notwithstanding anything contained in any other provisions of this Act”.
2.(b) That the Ld.CIT(A) erred in not deciding the objections raised by the Ld. A.O. as in Ground No. 2 above but erroneously rejected the assessee’s claim of set off the unabsorbed losses on a different ground.
3. That in Para-3.2.3 of his order the Ld.CIT(A) erred in holding that since the assessee had no Book loss or unabsorbed depreciation after setting off, the A.O. had rightly not allowed set off of Book Profit against the so called unabsorbed losses.
3.(a) That in Para-3.2 of his orders the Ld.CIT(A) was not justified in observing that the entire Brought forward losses and depreciation had been adjusted against its General Reserve in the assessee’s Books of Accounts and therefore, as far as its Books of Accounts were concerned, there was no unabsorbed losses or depreciation remaining as on 31.03.2009 in its account prepared under the Companies Act.
3.(b) That the Ld.CIT(A) erred in holding that there was no brought forward unabsorbed losses in the Assessee’s Books of Account as on 31.03.2009 merely because the assessee’s Statutory Auditor set off such Brought forward business losses with its General Reserve instead of showing these two item separately.
4. That since both the Ld. A.O. and the Ld.CIT(A) erred in rejecting the assessee’s claim of set off its unabsorbed business losses relating to Asstt. Years 1996-97,1997-98 and 1998-99 totaling Rs.2,95,24,689/- on different grounds which were both untenable, the Ld. A.O. may kindly be directed set off its Brought forward unabsorbed business losses with the Net Profit relating to Asstt. Year 2009-10 and re-compute its adjusted Book Profit for Asstt. Year 2009-10 as per law.
5. That, the appellant craves leave to alter, amend, rescind and substitute any of the above-mentioned grounds and add any further grounds before or at the time of hearing of the appeal.
4. The facts of the case which can be stated quite shortly are as follows: The assessee company is running a hospital and providing treatment to the patients. The assessee filed its return of income on 23-09-2009 showing a total income of Rs. Nil. The return of income was processed u/s 143(1) of the Act. Later, the case of the assessee was selected for scrutiny, and Ld AO framed assessment under section 143(3) of the Act wherein he disallowed a sum of Rs. 1,25,83,682/- u/s 40(a)(ia) of the Act on account of non-deduction of TDS on payments made to National Neuroscience Centre.
5. Aggrieved by the order of the assessing officer the assessee carried the matter in appeal before the learned CIT(A). The learned CIT(A) vide his order dated 04-03-2014 enhanced the disallowance to Rs. 1,70,28,307/-, thus an additional sum of Rs.44,44,625/- (Rs.1,70,28,307- Rs.1,25,83,682), was disallowed by him.
6. Thereafter, in pursuance of the learned CIT(A) order dated 04-03-2014, the learned AO passed the order u/s 251/143(3) of the Act dated 12-08-2014 wherein the benefit of deduction of Rs.2,95,24,689/- on account of brought forward losses in the computation of Book Profits as per item No.(iii) of Explanation 1 to section 115JB of the Act was not allowed. Since this was a mistake apparent from records, therefore, the assessee filed a rectification petition u/s 154 of the Act dated 02-09-2014 requesting the learned AO to rectify the computation of adjusted book profits and allow the deduction of Rs.2,95,24,689/-, being lower of brought forward loss and unabsorbed depreciation. A copy of Form 29B issued by an independent Chartered Accountant was also submitted before the AO along with the petition. A copy of the petition and Form 29B is enclosed as page 1 to 5 of the paper book. The break up of Rs. 2,95,24,689/- is as follows:
