By C. N. Vaze, Shailesh Kamdar, Chartered Accountants
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New Page 2
10 (2008) 117 TTJ 891 (Ahd.)
Fascel Ltd. v. ITO
ITA No. 1195 (Ahd.) of 2007
A.Y. : 2003-04. Dated : 17-8-2007
S. 79 and S. 115JB of the Income-tax Act, 1961 — In arriving
at the book profit u/s.115JB, the lower of the amount of brought forward loss or
unabsorbed depreciation as appearing in the books of account of the assessee has
to be reduced, irrespective of the fact whether the same is allowable u/s.79 or
not.
While computing the book profit u/s.115JB for A.Y. 2003-04,
the Assessing Officer held that since there was a substantial change in
shareholding in A.Y. 2000-01, the provisions of S. 79 were attracted. Therefore,
the brought forward loss/depreciation up to A.Y. 2000-01 is not to be carried
forward for computing the business income as well as for the purposes of S.
115JB. The Assessing Officer also held that there is no direct case law on the
subject, but logic demands that prohibition u/s.79 shall apply both to normal
computation u/s.28 to u/s.43C as well as u/s.115JB. The CIT(A) upheld the
Assessing Officer’s order.
The Tribunal held in favour of the assessee. The Tribunal
noted as under :
(a) Clause (iii) of the Explanation to S. 115JB(2)
specifically provides that the amount of loss brought forward or unabsorbed
depreciation as per the books of account is to be reduced from the book profit
and it is lower of the two amounts that is to be reduced. It is the amount
which is as per the books of accounts that is to be reduced and not as per the
income-tax records which has been computed under the provisions of the Act.
(b) The admissibility of loss as per other provisions of
the Act has nothing to do with the computation of book profit and that is made
clear by the provisions of clause (iii) of the Explanation. If it is appearing
in the books of accounts and not set off in the subsequent year’s profit, the
effect is to be given in the impugned year of profit while computing the book
profit of the assessee.
