2010 (5) TMI 657

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....sessing Officer noticed that the income computed based on return filed is below 30 per cent. of the book profit and, therefore, assessment was proposed on 30 per cent. of the book profit under section 115JA of the Income-tax Act. The assessee claimed deduction of Rs. 1,43,11,514 as carry forward depreciation, which was originally allowed by the Assessing Officer while completing regular assessment. However, later the Assessing Officer noticed that, by virtue of clause (b) of Explanation (iii) of section 115JA, deduction is admissible only if the assessee has brought forward business loss as well as depreci- ation for the previous year. It was noticed that the carry forward business loss at the end of the year 1994-95 was Rs. 1,07,74,451 and....

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....tice that there is no controversy on the facts of this case, which are stated in detail in the order issued under section 154. The Tribunal, however, held that the eligibility for deduction under clause (b) of Explanation (iii) is a debatable issue and, therefore, rectification is not called for. The contention raised by the counsel for the Revenue is that the original assessment was made by the Assessing Officer without taking into account the mandatory requirement of clause (b) of Explanation (iii), which provides for deduction of brought forward business loss or unabsorbed depreciation in the following words :   "(b) the provisions of this clause shall not apply if the amount of loss brought forward or unabsorbed depreciation is ....

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....ssessee is entitled to limit the set off of business loss brought forward up to the year 1993-94 against profit for the financial year 1995-96 on Rs. 7,36,68,187 so that, the balance brought forward business loss is available with them, which will be Rs. 3,40,76,274. It is seen that the Tribunal had accepted the FIFO method furnished by the assessee, the details of which are stated in the Tribunal's order in paragraph 8. However, we do not know how the FIFO method can help the assessee in this case because it authorizes only setting off profit of the subsequent year against brought forward business loss or depreciation of the earliest years first, then next year's and so on and it does not entitle the assessee to bifurcate the brought forwa....