2011 (8) TMI 516

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....at the book profits u/s 115J, even though such depreciation was not carried forward?"   2. In respect of the assessment year 1989-1990, the assessee filed a return of income, on 29.12.1989, returning NIL income and profit under Section 115J to the tune of 2,79,38,140/-. Subsequently, a revised return was made wherein there was a claim on the investment allowance. The Assessment was completed by the Assessing Officer claiming that an extent of Rs.2,01,38,614/- was to be deducted towards unabsorbed depreciation for the year 1987-1988. Thus the adjusted profits was arrived at Rs.9,31,27,144/-; 30% of the above was arrived at Rs.2,79,38,143/-.   3. In exercise of the powers under Section 263 of the Income Tax Act, 1961, the Comm....

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....d out to the balance sheet as on 31.3.1988 showing that there was no unabsorbed loss or unabsorbed depreciation for being carried forward to the next year. Although the company incurred a loss during that period it was the unabsorbed loss and depreciation which were adjusted against the committed reserve. It was also pointed out that the assessee declared dividend thereon.   6. Having regard to the above said facts and that the company in order declared the dividend in the previous year relating to the assessment year 1989-1990, the assessee rightly, took the unabsorbed depreciation and loss to the General Reserve and got it adjusted thereon, hence, the entire book profit of Rs.11,22,65,758/- was to be taken as a profit for the year....

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....en the effect of the working of the Profit and Loss Account revealed a positive profit and dividend was also declared thereon, there was nothing to be carried forward on the unabsorbed depreciation for being considered under year under consideration. Thus, if dividend is to be declared, as per Section 205(1) of the Income Tax Act, the same is possible only after deduction of the loss or depreciation from the current year profit. Since the unabsorbed depreciation was already adjusted towards the general reserve of the previous year, there being no loss to be carried forward, the Tribunal committed a serious error in accepting the plea of the assessee.   9. In spite of service of notice on the assessee, there is no representation on t....