Sick industrial company relief under MAT continues until net worth recovers, despite abated BIFR proceedings.

Section 115JB Explanation 1(vii) allows a sick industrial company to reduce profits for MAT computation from the year it became sick until the year its net worth equals or exceeds accumulated losses. The Tribunal's analysis states that abatement of BIFR proceedings did not, by itself, remove the company from the scope of this special adjustment, and later SARFAESI proceedings did not override the provision. Because the assessee's net worth remained negative, the reduction in book profit was allowable and the connected Revenue grounds became academic.

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Issues: Whether the assessee, being a sick industrial company whose net worth had not become equal to or exceed its accumulated losses, was entitled to reduction of profits while computing book profit under section 115JB, and whether the Revenue's other related grounds survived once that relief was upheld.

Analysis: The assessee had been declared sick under the Sick Industrial Companies (Special Provisions) Act, 1985, and the statutory language in Explanation 1(vii) to section 115JB permits reduction of profits from the assessment year in which the company became sick until the assessment year in which its entire net worth becomes equal to or exceeds the accumulated losses. The fact that the BIFR proceedings had abated did not, by itself, alter the sick-company status for the purpose of the MAT adjustment. The Tribunal held that the later proceedings under SARFAESI did not displace the operation of the special provision in section 115JB, and since the assessee's net worth remained negative, the reduction was allowable.

Conclusion: The assessee was entitled to the benefit under section 115JB Explanation 1(vii), and the Revenue's challenge on this issue failed. The connected grounds based on the same relief were treated as academic and were also rejected.

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