PVR Pictures Ltd Vs DCIT (ITAT Delhi)
ITAT Delhi held that lower of unabsorbed depreciation and business loss deserved to be set off against the current year books profit in terms of provisions of clause (iii) of Explanation-1 to Section 115JB (2) of the Income Tax Act.
Facts- The assessee reiterated adjustment of carried forward business loss or unabsorbed depreciation whichever is lower, against ‘Book Profit’ for the purposes of Section 115JB of the Act. The CIT(A) observed that the assessee is not entitled to such adjustment in the facts of the case.
Aggrieved by the denial of relief, the assessee preferred appeal before Tribunal. The adjustment of Book profit under by Section 115JB by lower of business loss and unabsorbed depreciation is in issue.
Conclusion- Held that the assessee has correctly considered the figure of unabsorbed depreciation for Financial Year 2010-11 at Rs.22,18,04,962/- in its working which portion has remained unabsorbed against the existing book profits of that year. The CIT(A) in our view, has wrongly considered the entire depreciation allowance of Rs.39,38,03,227/- instead of restricting itself to the unabsorbed component. The figure of Rs.39,38,03,227/- considered by the CIT(A) is total depreciation allowance instead of unabsorbed depreciation and thus the position taken by the CIT(A) is contrary to the phraseology of clause (iii) of Explanation-1 to Section 115JB(2). To reiterate clause (iii) of Explanation-1 to Section 115JB(2) uses the expression ‘unabsorbed depreciation’ which has distinct connotations vis-à-vis total depreciation. We thus find merit in the plea of the assessee in justification of the computation of adjustment available to it against the book profit. In this view of the matter, the claim of the assessee of Rs.93,06,502/- being lower of unabsorbed depreciation and business loss deserves to be set off against the current year book profit in terms of the provisions of clause (iii) of Explanation-1 of Section 115JB(2) of the Act.
FULL TEXT OF THE ORDER OF ITAT DELHI
The captioned appeal has been filed by the assessee against the order of the ld. CIT(A)-VII, New Delhi, dated 29.03.2017 arising from the assessment order dated 28.02.2017 passed by the Assessing Officer u/s.143(3) of the Act, concerning Assessment Year 2012-13.
2. As per the grounds of appeal, the assessee has challenged the computation of adjustment allowable in terms of clause (iii) of Explanation-1 to Section 115JB(2) for computation of book profits made by the Assessing Officer resulting in lower adjustment to the extent of Rs.93,06,502/-.
3. When the matter was called for hearing, the ld. counsel for the assessee submitted that;
(i) the assessee furnished its return of income computing total income under normal provisions of the Act. Likewise, book profit under Section 115JB was also computed at Nil. In the course of the assessment proceedings, the book profit was re-determined by the assessee at Rs.1,10,12,730/-. The Assessing Officer computed the tax liability on such book profits accordingly.
(ii) In the first appeal, the assessee contended that it is entitled to adjust the book profit by way of brought forward loss or depreciation as per books of account whichever is less in terms of clause (iii) of Explanation-1 to Section 115JB(2) of the Act.
4. In the first appeal, the assessee reiterated adjustment of carried forward business loss or unabsorbed depreciation whichever is lower, against ‘Book Profit’ for the purposes of Section 115JB of the Act. The CIT(A) observed that the assessee is not entitled to such adjustment in the facts of the case. The relevant operative paragraph of the order of the CIT(A) reads as under:
5.3 I have carefully considered the assessment order and written submission filed by the Ld. AR. The appellant has provided a working in respect of Book Profit u/s.115JB as under:
