Case Law Details
DCIT Vs Railtel Corporation Of India Ltd. (ITAT Delhi)
On perusal of the audit report of the Assessee-company, we observe that the Independent Statutory Auditor has expressed ‘qualified’ opinion on the financial statement and one of the qualifications relates to claim of loss on revaluation of assets in question. The qualification of Auditor has the effect of stating that book profits declared by the Assessee do not bear the trappings of true and fair expression of ‘statement of profit and loss’. This being so, it cannot be said that book profits disclosed in the financial statement is sacrosanct and assessee acquires indefeasible right in the matter of its declaration of book profits. Secondly, we also find merit in the plea of the Revenue that notwithstanding the fact that ‘loss on account of revaluation of fixed asset’ does not arise by way of provision for diminution in the value of asset but an actual loss, such capital loss is not a deductible loss in nature nevertheless. The expression ‘income defined under Section 2(24) of the Act does not include such capital losses. The capital loss claimed on account of impairment of assets, in our view, is liable to be adjusted for the purposes of determination of book profit similar to the adjustment available in respect of capital receipts not taxable under the normal provisions of the Act. This view is supported by the decision of the Coordinate Bench of ITAT in ITO vs. Ganesh Sagar Infrastructure (P.) Ltd., (2022) 135 taxmann.com 313 (Ahmedabad).
We are thus of the considered view that the assessee is not entitled to reduce the book profit by the capital loss debited to the P&L account which is subject matter of qualification by Auditors. Such capital loss is neither eligible for deduction under the normal provisions nor under the alternate provisions of taxation. We thus set aside the action of the CIT(A) on this score and restore the position taken by the Assessing Officer.
FULL TEXT OF THE ORDER OF ITAT DELHI
The captioned appeal has been filed by the Revenue against the order of the Commissioner of Income Tax (Appeals)-XXV, New Delhi (‘CIT(A)’ in short) dated 18.12.2017 arising from the assessment order dated 30.12.2016 passed by the Assessing Officer (AO) under Section 143(3) of the Income Tax Act, 1961 (the Act) concerning AY 2014-15. The grounds of appeal raised by the Revenue read as under:
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