TaxTMI 
TaxTMI 
2023 (3) TMI 558
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....income under normal provisions of the Act. Likewise, book profit under Section 115JB was also computed at Nil. In the course of the assessment proceedings, the book profit was re-determined by the assessee at Rs.1,10,12,730/-. The Assessing Officer computed the tax liability on such book profits accordingly. (ii) In the first appeal, the assessee contended that it is entitled to adjust the book profit by way of brought forward loss or depreciation as per books of account whichever is less in terms of clause (iii) of Explanation-1 to Section 115JB(2) of the Act. 4. In the first appeal, the assessee reiterated adjustment of carried forward business loss or unabsorbed depreciation whichever is lower, against 'Book Profit' for the purposes of Section 115JB of the Act. The CIT(A) observed that the assessee is not entitled to such adjustment in the facts of the case. The relevant operative paragraph of the order of the CIT(A) reads as under: 5.3 I have carefully considered the assessment order and written submission filed by the Ld. AR. The appellant has provided a working in respect of Book Profit u/s.115JB as under: Particulars B/ forward Loss without Dep & A....
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....ause, - (a) the loss shall not include depreciation; (b) the provisions of this clause shall not apply if the amount of loss brought forward or unabsorbed depreciation is nil; or]. 5.6. On plain reading of the Explanation, it is clear in the computation of Book Profit of the current year, the amount of loss brought forward or unabsorbed depreciation whichever is less as per book is to be set off. The Explanation does not state that the position of loss or unabsorbed depreciation has to be considered on year to year basis i.e. the assessee has to aggregate the losses as well as the profits for all the year and then it will be allowed loss brought forward or depreciation whichever is less. In a financial year, if there is a loss after depreciation but after excluding depreciation, it results into profit, that profit has to be aggregated and set off against the brought forward losses and the resultant loss will be available to the assessee for the next year. Applying the provision to the facts of the appellant, it is clear that the profit for the F.Y. 2010-11 (A.Y. 2011-12) before depreciation and amortization of Rs.17,19,98,265/- is available against which the brought forwar....
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....g in the present anamoly. It was contended that the action of the CIT(A) is based on both misconception of law and misconception of facts. 6. The Ld. DR for the Revenue, on the other hand, relied upon the order of the CIT(A). 7. We have considered the rival submissions and perused the material available on record. The computation of 'unabsorbed depreciation' and 'business loss' for the purposes of adjustment of lower of the two, against the 'book profits' in terms of clause (iii) of Explanation-1 to Section 115JB(2) of the Act is under controversy. 7.1 Clause (iii) of Explanation-1 to Section 115JB(2) of the Act states that an assessee is entitled to reduce the book profits by the amount of loss brought forward (excluding depreciation) or unabsorbed depreciation, whichever is less as per books of account. As per the plain language of this provision, it is to be noted that the expression employed in the provision is the "unabsorbed depreciation" and not the "depreciation". The reference to the words "unabsorbed depreciation" rather than the word "depreciation" reflects the intention of the Legislature that in any earlier year if there is some standalone book profit, depreci....
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....epreciation of Rs.1,83,22,628/- F.Y. 2010-11 22,18,04,962 Total Book loss (including depreciation) Rs.22,18,04,962 (A) Depreciation Rs.393,803,227 (B) Standalone profit (excluding depreciation) (-) Rs.171998265 (A)-(B) Thus, total loss of Rs.22,18,04,962/- represent unabsorbed depreciation after part absorption against such profits (393803227 - 171998265) Total 24,01,27,590 93,06,502 Total b/f loss (excluding depreciation) is less than total unabsorbed depreciation. 9. Similarly, the adjustment entitled to the assessee against the book profit as determined by the CIT(A) is reproduced herein: CIT(A) working Years Total Unabsorbed Depreciation (Profit)/Loss [excluding depreciation Remarks As on 1.4.2009 Profit (1,01,94,143) Opening profit after absorbing Depreciation as on 01.04.2009 F.Y. 2009-10 1,83,22,628 Loss 1,95,00,645 Total book loss for FY 200910 of Rs.3,78,23,273/- include both book loss (excluding depreciation) Rs.1,95,00,645/- and unabsorbed depreciation of Rs.1,83,22,628/- F.Y. 2010-11 39,38,03,227 Profit (17,19,98,265) Total Book loss (including depreciation) Rs.22,18,04,962....