Supreme Court: Issues of Party Capacity and Maintainability Must Be Decided by Arbitral Tribunal  ||  Supreme Court: Omissions in Chief Examination Can Be Rectified During Cross-Examination  ||  Supreme Court: Items Given by Accused to Police Are Not Section 27 Recoveries under Evidence Act  ||  Gujarat High Court: Waqf Institutions Must Pay Court Fees When Filing Disputes in State Tribunal  ||  Allahabad High Court: Law Treats All Equally, State Cannot Gain Undue Benefit from Delay Condonation  ||  SC: SARFAESI Act Was Not Applicable in Nagaland Before its 2021 Adoption, Dismisses Creditor’s Plea  ||  SC: Lis Pendens Applies To Money Suits on Mortgaged Property, Including Ex Parte Proceedings  ||  Kerala HC: Civil Courts Cannot Grant Injunctions in NCLT Matters and Such Orders Can Be Set Aside  ||  Bombay High Court: Technical Breaks to Temporary Employees Cannot Deny Maternity Leave Benefits  ||  NCLAT: Appellate Jurisdiction Limited to Orders Deciding Parties’ Rights, Not Procedural Directions    

PVR Pictures Ltd, New Delhi. Vs. Deputy Commissioner of Income Tax - (Income Tax Appellate Tribunal) (10 Mar 2023)

Assessee is entitled to reduce the book profits by the amount of loss brought forward (excluding depreciation) or unabsorbed depreciation

MANU/ID/0370/2023

Direct Taxation

The assessee has challenged the computation of adjustment allowable in terms of clause (iii) of Explanation-1 to Section 115JB(2) of Income Tax Act, 1961 for computation of book profits made by the Assessing Officer resulting in lower adjustment to the extent of Rs.93,06,502.

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.

The assessee has correctly considered the figure of unabsorbed depreciation for Financial Year 2010-11 at Rs.22,18,04,962 in its working which portion has remained unabsorbed against the existing book profits of that year. The CIT(A) has wrongly considered the entire depreciation allowance of Rs.39,38,03,227 instead of restricting itself to the unabsorbed component. The figure of Rs.39,38,03,227 considered by the CIT(A) is total depreciation allowance instead of unabsorbed depreciation and thus the position taken by the CIT(A) is contrary to the phraseology of clause (iii) of Explanation-1 to Section 115JB(2).

To reiterate clause (iii) of Explanation-1 to Section 115JB(2) uses the expression ‘unabsorbed depreciation’ which has distinct connotations vis-à-vis total depreciation. Present Tribunal thus find merit in the plea of the assessee in justification of the computation of adjustment available to it against the book profit.

In this view of the matter, the claim of the assessee of Rs.93,06,502 being lower of unabsorbed depreciation and business loss deserves to be set off against the current year book profit in terms of the provisions of clause (iii) of Explanation-1 of Section 115JB(2) of the Act. Hence, the action of the CIT(A) is reversed. The appeal of the assessee is allowed.

Tags : COMPUTATION   ADJUSTMENT   LOSS  

Share :        

Disclaimer | Copyright 2025 - All Rights Reserved