Tribunal permits set off of Rs.93,06,502 against book profit, upholds correct unabsorbed depreciation computation.

The Tribunal allowed the assessee's appeal, permitting the set off of Rs.93,06,502 against the current year book profit, reversing the CIT(A)'s decision. The correct computation of unabsorbed depreciation at Rs.22,18,04,962 was upheld, emphasizing that only the balance unabsorbed depreciation should be considered for adjustment against available profit, in accordance with the law.

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Issues Involved:
1. Computation of adjustment allowable under clause (iii) of Explanation-1 to Section 115JB(2) for computation of book profits.
2. Determination of "unabsorbed depreciation" versus "total depreciation" for the purposes of adjustment against book profits.

Summary:

Issue 1: Computation of Adjustment Allowable under Clause (iii) of Explanation-1 to Section 115JB(2) for Computation of Book Profits
The assessee challenged the computation of adjustment allowable under clause (iii) of Explanation-1 to Section 115JB(2) for computation of book profits, resulting in a lower adjustment of Rs.93,06,502/-. The Assessing Officer computed the tax liability on re-determined book profits of Rs.1,10,12,730/-. The CIT(A) observed that the assessee is not entitled to such adjustment, stating that the profit for FY 2010-11 before depreciation and amortization of Rs.17,19,98,265/- should be set off against brought forward losses. Consequently, there would be nil loss as on 01.04.2011, and the appellant's claim for set off of accumulated depreciation or losses was rejected.

Issue 2: Determination of "Unabsorbed Depreciation" versus "Total Depreciation" for Adjustment Against Book Profits
The assessee contended that the CIT(A) wrongly computed the amount of unabsorbed depreciation and business loss for FY 2010-11. The CIT(A) separated the total depreciation of Rs.39.38 crore as unabsorbed depreciation, resulting in nil business loss and unabsorbed depreciation of Rs.41,21,25,855/-. The Tribunal noted that the expression "unabsorbed depreciation" reflects the intention that only the balance unabsorbed depreciation after adjusting against available profit should be considered. The Tribunal found that the CIT(A) considered the entire depreciation allowance instead of restricting it to the unabsorbed component, contrary to clause (iii) of Explanation-1 to Section 115JB(2). The assessee's computation of unabsorbed depreciation at Rs.22,18,04,962/- was deemed correct.

Conclusion:
The Tribunal reversed the action of the CIT(A) and allowed the claim of the assessee, permitting the set off of Rs.93,06,502/- being lower of unabsorbed depreciation and business loss against the current year book profit. The appeal of the assessee was allowed.

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