The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) overturned the order of the Commissioner of Income Tax (Appeals) [CIT(A)] providing relief to M/s PVR Pictures Limited.
According to the provisions of paragraph (iii) of Explanation-1 of Section 115JB(2) of the Income Tax Act, the ITAT allowed the assessee’s claim of Rs. 93,06,502/-, which is the lower of unabsorbed depreciation and business loss, to be set off against the current year’s book profit.
The bench has elucidated the provisions of paragraph (iii) of Explanation-1 to Section 115JB (2) relating the computation of book profits for taxes.
According to the provisions of the Income Tax Act, the Tribunal determined that the amount that is lesser between unabsorbed depreciation and business loss merits being offset against the book profits for the current Assessment Year.
The Assessee contested the Assessing Officer’s computation of the adjustment allowed under clause (iii) of Explanation-1 to Section 115JB(2) for the computation of book profits, which resulted in a lower adjustment of Rs. 93,06,502 as the background to the appeal.
For the purposes of Section 115JB of the Act, the assessee reiterated the adjustment of carried forward business loss or unabsorbed depreciation, whichever is lower. The CIT(A) noted that given the case’s facts, the assessee is not entitled to such an adjustment.
The CIT(A) has separated the total depreciation of Rs.39.38 crore as unabsorbed depreciation and taken the remaining amount of Rs.17,19,98,268 as business loss.
The bench of Pradip Kumar Kedia (Accountant Member) and Yogesh Kumar US (Judicial Member) observed that the expression employed in the provision is the “unabsorbed depreciation” and not the “depreciation”.
According to ITAT, the phrase “unabsorbed depreciation” rather than “depreciation” accurately captures the Legislature’s intent that any earlier year’s depreciation should be adjusted to the extent of any standalone book profit that year and that any remaining unabsorbed depreciation, if any, should only be used for Section 115JB adjustment purposes.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to TaxscanAdFree. Follow us on Telegram for quick updates.
