NPA provision allowed while computing book profits under section 115JB, additional depreciation on windmill permitted

ITAT Kolkata allowed the assessee's appeal against CIT's revision order u/s 263. The tribunal held that provision for non-performing assets (NPA) cannot be disallowed while computing book profits u/s 115JB as it doesn't reduce asset value under clause (i) of Explanation 1. Regarding additional depreciation on windmill, balance 10% can be claimed in subsequent year when machinery operates less than 180 days. For short-term capital loss on land transfer, CIT cannot substitute his view for AO's assessment unless patently unsustainable in law. The revision order was deemed erroneous.

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Issues Involved:

1. Non-addition of provision for NPA in computing book profits under section 115JB.
2. Short-term capital loss claimed for sale of land and building.
3. Claim of exclusion of Debt Redemption Reserve (DRR) reversed in computation of book profits under section 115JB.
4. Deduction of balance 10% additional depreciation on windmill capitalized in the assessment year 2012-13.
5. Reduction of income from long-term investment in VCF from PGBP and offer of net income in computation of total income as per form 64 issued by the fund.
6. Exclusion of capital profits from computation of book profits under section 115JB.

Summary:

Issue 1: Non-addition of provision for NPA in computing book profits under section 115JB
The Tribunal found that the issue is covered by its own decision in the assessee's case for Assessment Years 2008-09 and 2011-12, where it held that the provision for NPA is made as per RBI prudential norms and does not reduce the value of assets. Therefore, it cannot be added back under section 115JB. The ld. Pr. CIT erred in holding the assessment order as erroneous and prejudicial to the interest of the revenue on this issue.

Issue 2: Short-term capital loss claimed for sale of land and building
The Tribunal noted that the Assessing Officer had examined the computation of short-term capital loss (STCL) and its reconciliation with the computation of income during the original assessment proceedings. The Tribunal found that the Assessing Officer had taken a permissible view under the law, and hence, the order was not prejudicial to the interest of the revenue.

Issue 3: Claim of exclusion of DRR reversed in computation of book profits under section 115JB
The Tribunal observed that the Assessing Officer had dealt with the claim and agreed with the contentions of the assessee in his order under section 263/143(3) dated 24/12/2019. Therefore, the issue was not pressed by the assessee.

Issue 4: Deduction of balance 10% additional depreciation on windmill capitalized in the assessment year 2012-13
The Tribunal referred to the decision of the Hon'ble Karnataka High Court in CIT vs. M/s. Rittal India Pvt. Ltd., which held that the balance 10% additional depreciation can be claimed in the subsequent assessment year. The Tribunal also cited similar views from the ITAT Kolkata in the cases of Century Enka Ltd. and Birla Corporation Limited. Thus, the ld. Pr. CIT erred in holding the order as erroneous and prejudicial to the interest of the revenue on this issue.

Issue 5: Reduction of income from long-term investment in VCF from PGBP and offer of net income in computation of total income as per form 64 issued by the fund
The Tribunal noted that the Assessing Officer had dealt with this issue in the order under section 263/143(3) dated 24/12/2019, agreeing with the assessee's contentions. Therefore, the issue was not pressed by the assessee.

Issue 6: Exclusion of capital profits from computation of book profits under section 115JB
The Tribunal found that the Assessing Officer had conducted proper enquiries and taken a permissible view regarding the exclusion of capital profits from the computation of book profits under section 115JB. Citing the Tribunal's decision in J.L. Morrison (India) Ltd. vs. ACIT, it held that the ld. Pr. CIT erred in holding the order as erroneous and prejudicial to the interest of the revenue on this issue.

Conclusion:
The Tribunal quashed the order passed under section 263 of the Act and restored the assessment order dated 30/12/2016. The appeal of the assessee was allowed.

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