Case Law Details
For the purposes of section 115JB of the Act, the term gloss brought forward’ can only mean losses on the last day of the immediately preceding year and no other meaning can be given to it.
In the case of CIT Vs. Sumi Motherson Innovative Engineering Ltd. [2010-TIOL-756-HC-DEL-IT]’, the Delhi High Court (“NC”) held that the term ‘loss brought forward’ in clause (iii) provided in Explanation (1) to sub-section 2 of section 115JB of the Income-tax Act, 1961 (“the Act”) can only mean the loss on the last day of the immediately preceding year and events during the year would have no impact on the brought forward losses for the purposes of the above provisions of section 115JB of the Act.
Facts
• The assessee was engaged in the business of manufacture and sale of injection moulded plastic parts, stamping parts/moulds and job work. For the relevant Assessment Year (“AY”), the assessee filed its return of income declaring ‘Nil’ taxable income. Furthermore, the assessee earned a net profit of INR 79.75 million which was further reduced by the accumulated losses of INR 346.70 million which were brought forward from the earlier years.
• During the year, the assessee company passed a capital reduction scheme under section 100 of the Companies Act, 1956 by virtue of which brought forward losses of the immediate preceding years were reduced to Nil. The scheme of capital reduction was approved by the shareholders in the Annual General Meeting and thereafter by the HC.
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