Case Law Details
Golden Weaving Mills Pvt Ltd Vs ITO (ITAT Chennai)
The case of Golden Weaving Mills Pvt Ltd Vs. ITO (ITAT Chennai) revolves around the dispute concerning the computation of book profit under Section 115JB of the Income Tax Act, 1961 for the assessment year 2012-13. The appeal was filed by the assessee against the order passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi, dated 20.07.2023.
The primary issue raised by the assessee was the disallowance of deduction claimed for the amount of interest waiver of Rs. 4,71,82,883/- credited to the Profit and Loss Account (P&L A/c) while computing book profit under Section 115JB. The appellant argued that the interest waiver, credited to the P&L A/c, should be allowed as a deduction under Clause (vii) of Explanation-1 to section 115JB(2) since the appellant had been declared a sick industrial company by the Board for Industrial and Financial Reconstruction (BIFR) under the Sick Industrial Companies (Special Provisions) Act, 1985.
However, both the Assessing Officer and the Commissioner of Income Tax (Appeals) upheld the disallowance, stating that the appellant failed to prove that its net worth was negative for the relevant assessment year, a condition necessary to claim deduction towards profit while computing book profit under Section 115JB.
The Tribunal, after hearing arguments from both sides, examined the relevant provisions of Clause (vii) of Explanation (1) to section 115JB of the Act. It noted that the appellant company had been declared a sick industrial company by the BIFR and that the net worth of the company was negative. The accumulated losses of the company exceeded its net worth. Therefore, the Tribunal concluded that the appellant satisfied the conditions prescribed for claiming deduction towards profit of sick industrial companies while computing book profit under Section 115JB.
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