2022 (2) TMI 806

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....8-09, the appellant undertook a capital reduction scheme approved the Hon'ble Karnataka High Court. As a result, accumulated loss of Rs. 52,67,81,833 was reduced to Nil and adjusted against the authorized share capital. 5. For FY 2009-10, depreciation loss of Rs. 55,69,139 was set-off and book profit was Nil. This set-off was accepted by the learned DC Circle 12(3) in the scrutiny assessment. Subsequently, the assessment order was rectified under section 154, disallowing the loss Rs. 55,69,139 which was set-off against the profit resulting in tax demand of Rs. 11,65,245. 6. On appeal, the learned Commissioner of Income-tax (Appeals) - 3, upheld the rectification order disallowing the set-off of Rs. 55,69,139. Appeal to the Hon'ble ITAT was filed on 7th April 2017. 7. The Appellant's case is covered by the ratio of the following decisions: (a) Commissioner of Income-tax-III, New Delhi v. Sumi Motherson Innovative Engg. Ltd. [ (2010) 195 Taxman 353 (Delhi)] (para 15, pg. 79 of the paperbook) (b) Surat Textile Mills Ltd. 1(2016) 70 taxmann.com 158 (Ahmedabad - Trib.)] (c) Prithvi Softech Limited ITA No. 797/Mds/2010, Ch....

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....lowing the ratio of Prithvi Softech case, even if the P&L Dr. balance is Nil, the appellant is entitled to set-off the loss remaining and brought forward from earlier years as per the books. 11. Considering the above submissions, it is prayed that the Hon'ble Tribunal allow the unabsorbed depreciation loss of Rs. 55,69,139 to be set-off against the book profit for FY 2009-10 (AY 2010-11)." 3. The facts of the case are that the assessee is a Private Limited Company engaged in the business of manufacturing and setting instant noodles. The assessment for the relevant year was completed u/s. 143(3) of the Act. As against the returned toss of Rs. 10,50,068/-, the AO had made various disallowances and income was finally assessed as Rs. 9,11,23,817/-. However, after adjusting the brought forward loss under the normal provisions, the tax payable was determined as nil. For the purpose of MAT computation, the assessee had adjusted a sum of Rs. 55,69,139/- towards unabsorbed depreciation and consequently the book profit was determined as nil. 4. However, the AO had subsequently observed that no brought forward business loss was available to the assessee for the relevant yea....

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....iation from the accounts of the assessee in actual terms. Such loss would be available to the assessee as per the accounts prepared under Parts-II and III of Schedule-VI, and the assessee will be entitled to claim reduction of loss/unabsorbed depreciation, whichever is lower, from the book profit under clause (iii) of Explanation to Section 115JB, while making such computation for the purpose of section 115JB." 10. It was submitted that the set off of unabsorbed depreciation loss against the book profit in earlier years were as follows:- Particulars Brought Forward Business Loss Unabsorbed Depreciation Loss Total   Rs. Rs. Rs. 2005-06 (AY:2006-07) 48,34,69,216 15,48,05,581 63,82,74,797 Less: Adjusted during the year - 2,68,14,794 2,68,14,794 Carried forward to 2006-07 (AY: 07-08) 48,34,69,216 12,79,90,787 61,14,60,003  2006-07 (AY: 2007-08)  48,34,69,216  12,79,90,787  61,14,60,003 Less: Adjusted during the year - 5,25,71,072 5,25,71,072 Carried forward to 2007-08 (AY: 08-09) 48,34,69,216 7,54,19,715 55,88,88,931  2007-08 (AY: 2008-09)  48,34,6....

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.... the same as reflected in the balance sheet and placed reliance on the judgment in the case of Sumi Motherson Innovative Engg. Ltd. [ (2010) 195 Taxman 353 (Delhi)]. In our opinion, the above judgment cannot be applied to the assessee's case, as in the present case the assessee is having no brought forward loss. 16. Further the assessee relied on the decision of the Chennai Bench of the Tribunal in the case of Prithvi Softech Limited ITA No. 797/Mds/2010 dated 28.7.2021. In that case also, the assessee was having brought forward business loss for the last 4 years and no material was brought o record that such loss was set off against any profit of subsequent year in determining the book profits of the assessee company after the year in which such loss was suffered. Being so, the Tribunal held that such loss was available for set off during the year for determining the book profit as per the provisions of clause (iii) of section 115JB(2). However, in the present case, the facts are entirely different as the assessee is having no balance of brought forward business loss of earlier year. Being so, the various decisions relied on by the assessee have no application to the facts ....