Tribunal directs correct set-off of business loss & depreciation, allows deduction in book profit calculation.

The tribunal allowed the appeal of the assessee, directing the Ld. Assessing Officer to correctly set off the brought forward business loss and unabsorbed depreciation. Additionally, the tribunal accepted the assessee's claim for deduction of unabsorbed depreciation in the computation of book profit under section 115JB.

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Issues Involved:
1. General grievance against the order of the Ld. CIT(A).
2. Set off of brought forward business loss and unabsorbed depreciation.
3. Computation of book profit under section 115JB of the Income Tax Act.

Issue-wise Detailed Analysis:

1. General Grievance Against the Order of the Ld. CIT(A):
The first ground raised by the assessee was general in nature, alleging that the Ld. CIT(A) passed a perverse order without application of mind and ignoring submissions and settled law. The tribunal noted that this issue did not require adjudication.

2. Set Off of Brought Forward Business Loss and Unabsorbed Depreciation:
The second issue concerned the set off of brought forward business loss and unabsorbed depreciation. The assessee contended that the lower authorities erred in not providing the set off as per the provisions of section 72(2) read with section 32(2) of the Income Tax Act. The tribunal reviewed the relevant provisions and the facts of the case, noting that the assessee is a Private Limited Company engaged in broking and dealing in shares and securities. For the assessment year 2011-12, the assessee had positive income and claimed set off for brought forward business loss and unabsorbed depreciation from A.Ys. 2009-10 and 2010-11.

The tribunal highlighted that the correct method for adjustment should prioritize the set off of brought forward business loss before unabsorbed depreciation as per section 72(2). The Ld. Assessing Officer's method was found to be incorrect, and the tribunal directed the Ld. Assessing Officer to correctly set off the brought forward business loss and unabsorbed depreciation as per the assessee's computation, with adjustments for the assessed loss for A.Y. 2009-10. The tribunal allowed the grounds raised by the assessee on this issue.

3. Computation of Book Profit Under Section 115JB:
The third issue pertained to the computation of book profit under section 115JB of the Income Tax Act and the non-allowance of deduction for unabsorbed depreciation. The Ld. Assessing Officer had denied this deduction based on the observation that the deficit in the profit & loss account had already been adjusted with the general reserve, leaving no trace of unabsorbed loss or depreciation. The tribunal disagreed with this view, referring to the clear mechanism for calculating book profit set out in Explanation (1) to section 115JB(2) and emphasizing that the conditions invoked by the Ld. Assessing Officer were not legally tenable.

The tribunal cited a relevant decision in ITA No. 144/KOL/2013, which supported the assessee's contention that losses remain in the books until wiped out by profits and are available for reduction from book profits under section 115JB. Consequently, the tribunal found that the assessee had rightly claimed the deduction of unabsorbed depreciation for the purpose of calculating MAT and allowed the grounds raised by the assessee on this issue.

Conclusion:
In conclusion, the tribunal allowed the appeal of the assessee, directing the Ld. Assessing Officer to correctly set off the brought forward business loss and unabsorbed depreciation and to accept the assessee's claim for deduction of unabsorbed depreciation in the computation of book profit under section 115JB. The order was pronounced in the open Court on 22nd February 2023.

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