M/S. Milan Intermidiate LLP, Ahmedabad V. The Income tax Officer,Ward-2(1)(4), Ahmedabad

ITA 209/AHD/2018

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 7792 (ITAT-AHMEDABAD)
• Duration Of Justice: 6 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-07-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 25-01-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SAURABH SINGH
• Assessee Lawyers: SAUMIL JAIN
• Keywords: Depreciation; Advance ruling; Unabsorbed depreciation
• Section: 143(3); 115JB; 263

Judgement Text

, SMC , IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, AHMEDABAD BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER & SMT. MADHUMITA ROY, JUDICIAL MEMBER ./ I.T.A. NO. 209/AHD/2018 ( ASSESSMENT YEAR : 2011-12) M/S MILAN INTERMEDIATES LLP , ( ERSTWHILE M/S. MILAN INTERMEDIATES PRIVATE LIMITED ) 2, JASMIT DUPLEX, PATEL SOCIETY, GULBAI TEKRA, ELLISBRIDGE, AHMEDABAD - 380006 / VS. THE INCOME TAX OFFICER, WARD-2(1)(4), AHMEDABAD ./ ./ PAN/GIR NO. : AACCM0999H ( APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI SAUMIL JAIN, A.R / RESPONDENT BY : SHRI SAURABH SINGH, SR. D.R DATE OF HEARING 08/05/2018 !'# / DATE OF PRONOUNCEMENT 26/ 07/2018 / O R D E R PER PRADIP KUMAR KEDIA - AM: THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTANCE OF THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) DATED 13.11.2017 ARISING IN THE ASSESSMENT ORDER DATED 2 3.12.2016 PASSED BY THE ASSESSING OFFICER UNDER SECTION 143(3) READ WIT H SECTION 263 OF THE INCOME-TAX ACT, 1961 (THE ACT) CONCERNING ASSESSMEN T YEAR 2011-12. ITA NO.209 /AHD/2018 ASST.YEAR 2011-12 - 2 2. THE ASSESSEE IN THE PRESENT APPEAL SEEKS TO AGIT ATE THE ACTION OF THE LOWER AUTHORITIES IN LIMITING THE CLAIM OF THE ASSESSEE FOR REDUCTION IN BOOK PROFIT AS COMPUTED UNDER SECTION 115JB OF T HE ACT BY THE AMOUNT OF LOSS BROUGHT FORWARD OR UNABSORBED DEPREC IATION WHICHEVER IS LESS, AS PER BOOKS OF ACCOUNT TO RS. 18,43,991/- AS AGAINST THE CLAIM OF THE ASSESSEE FOR RS. 55,01,780/-. THE ASSESSEE T HUS SEEKS RELIEF BY WAY OF ITS CLAIM FOR REDUCTION OF NET PROFITS BY TH E AMOUNT OF RS. 55,01,780/- (BEING THE LOWER OF LOSS BROUGHT FORWAR D OR UNABSORBED DEPRECIATION AS PER BOOKS OF ACCOUNT) FOR THE PURPO SES OF CALCULATION OF BOOK PROFIT UNDER SECTION 115JB OF THE ACT. 3. BRIEFLY STATED, IN THE ASSESSMENT PROCEEDINGS PU RSUANT TO DIRECTIONS BY THE PRINCIPAL CIT UNDER SECTION 263 O F THE ACT, THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS WR ONGLY CALCULATED THE ELIGIBLE AMOUNT OF SET OFF TOWARDS LOWER OF THE BRO UGHT FORWARD LOSSES AND UNABSORBED DEPRECIATION WHILE COMPUTING THE BOO K PROFITS UNDER SECTION 115JB OF THE ACT. THE ASSESSING OFFICER PER USED A TABULATED STATEMENT OF BUSINESS LOSS AND DEPRECIATION AS PER BOOKS BEGINNING FROM ASSESSMENT YEAR 2003-04 AS REFERRED TO IN THE ASSES SMENT ORDER AND OBSERVED THAT THE ASSESSEE IS ENTITLED TO A LOWER S ET OFF AS TABULATED AND CONSEQUENTIALLY, THE BOOK PROFIT WAS DETERMINED AT RS. 44,94,813/- IN PLACE OF RS. 9,06,945/- SHOWN BY THE ASSESSEE IN TE RMS OF PROVISIONS OF SECTION 115JB READ WITH EXPLANATION BELOW SECTION 1 15JB. THE METHODOLOGY TOWARDS ADJUSTMENT AND SET OFF OF BROUG HT FORWARD LOSS AND UNABSORBED DEPRECIATION WHILE CALCULATING THE B OOK PROFIT WAS THUS DISPUTED BY THE ASSESSING OFFICER AND THE BOOK PROF IT WAS ASSESSED AT A HIGHER FIGURE IN THE ASSESSMENT FRAMED. ITA NO.209 /AHD/2018 ASST.YEAR 2011-12 - 3 4. AGGRIEVED, THE ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A) AND CHALLENGED THE QUANTIFICATION OF BOOK PROFIT UNDER SECTION 115JB BY THE ASSESSING OFFICER. THE ASSESSEE ALLEGED THAT THE AC TION OF THE ASSESSING OFFICER IS IN CONTRAVENTION OF EXPLANATION (1)(III) BELOW SECTION 115JB OF THE ACT. IT WAS CONTENDED BEFORE THE CIT(A) THAT INCOME TAX ACT DOES NOT PRESCRIBE ANY PARTICULAR METHODOLOGY/CHRON OLOGY WITH REGARD TO CARRY FORWARD AND SET OFF UNABSORBED LOSSES/DEPR ECIATION OTHER THAN A MERE STATEMENT OF LAW THAT THE NET PROFIT AS SHOWN IN THE PROFIT AND LOSS ACCOUNT IS TO BE REDUCED BY AMOUNT OF LOSS BROUGHT FORWARD OR UNABSORBED DEPRECIATION WHICHEVER IS LESS AS PER BO OKS OF ACCOUNT. IT WAS FURTHER CONTENDED BY THE ASSESSEE BEFORE THE CI T(A) THAT IN THE PRESENT CASE, THE ASSESSEE, FOLLOWING FEFO METHOD F OR SETTING OFF THE LOSSES, FIRST ADJUSTED THE LOSS OUT OF BROUGHT FORW ARD LOSSES ACCUMULATIONS AND THEREFORE OUT OF REMAINING UNABSO RBED DEPRECIATION AGAINST THE BOOK PROFITS IN THE ENSUING ASSESSMENT YEAR ON YEAR TO YEAR BASIS. FOR DOING SO, THE ASSESSEE RELIED UPON THE D ECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF ELI LILLY & COMPANY 334 ITR 186 WHERE SIMILAR METHODOLOGY IN THE MATTER OF CARRY FO RWARD AND SET OFF LOSSES WAS ACCEPTED FOR MAT PURPOSES AND WAS NOT IN TERFERED. THE CIT(A) HOWEVER DID NOT FIND MERIT IN THE PLEA RAISE D ON BEHALF OF THE ASSESSEE AND REFUSED TO INTERFERE WITH THE RE-COMPU TATION OF BOOK PROFIT AT HIGHER FIGURE BY THE ASSESSING OFFICER. 5. FURTHER AGGRIEVED, THE ASSESSEE PREFERRED APPEAL BEFORE THE TRIBUNAL. 6. THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESS EE C.A SAUMIL JAIN SUBMITTED AT THE OUTSET THAT THE ONLY DISPUTE INVOLVED IN THE PRESENT ITA NO.209 /AHD/2018 ASST.YEAR 2011-12 - 4 APPEAL IS WITH REGARD TO THE METHODOLOGY FOLLOWED B Y THE ASSESSEE COMPANY IN ADJUSTMENT AND SET OFF OF BROUGHT FORWAR D BUSINESS LOSS AND UNABSORBED DEPRECIATION WHILE CALCULATING THE BOOK PROFIT UNDER THE PROVISIONS OF SECTION 115JB OF THE INCOME TAX ACT. IT WAS SUBMITTED THAT THE ASSESSEE COMPANY HAS TOTAL BROUGHT FORWARD LOSSES INCLUDING UNABSORBED DEPRECIATION AS PER ITS AUDITED BOOKS OF ACCOUNT AT THE BEGINNING OF THE FINANCIAL YEAR 2010-11 I.E AS ON 0 1.04.2010 OF RS. 2,12,22,430/-. IT WAS SUBMITTED THAT THE ASSESSEE H AS FOLLOWED FIFO METHOD FOR SETTING OFF THE LOSSES. WHILE APPLYING T HIS METHOD, THE ASSESSEE ALSO FIRST ADJUSTED THE BROUGHT FORWARD BU SINESS LOSSES AND THEN UNABSORBED DEPRECIATION AGAINST THE PROFIT EAR NED IN THE SUBSEQUENT ASSESSMENT YEARS CONSISTENTLY ON YEAR TO YEAR BASIS. 6.1 A TABULATED STATEMENT SHOWING POSITION OF BROUG HT FORWARD BUSINESS LOSSES AND UNABSORBED DEPRECIATION AFTER A DJUSTMENT AND SET OFF AS MADE BY THE ASSESSEE COMPANY IN THE BOOKS OF ACCOUNT ON YEAR TO YEAR BASIS WAS INTER ALIA REFERRED WHICH IS REPRODU CED HEREUNDER FOR READY REFERENCE. AY PROFIT OR LOSS CURRENT YEAR DEPRECIAT ION PROFIT AFTER DEPRECIATI ON BROUGHT FORWARD LOSS UNABSORBED DEPRECIATION BOOK PROFIT POSITION OF CARRIED FORWARD LOSS POSITION OF UNABSORBED DEPRECIATIO N 2007-08 7,398,921 1,517,629 5,881,292 28,234,876 6,748,000 NIL 23,534,309 5,567,275 2008-09 9,367,857 3,168,860 6,198,997 23,534,309 5,567,275 631,722 17,964,906 4,937,682 2009-10 5,880,373 2,020,549 3,859,824 17,964,906 4,937,682 NIL 14,623,670 4,419,093 2010-11 99,522 1,943,433 - 1,843,911 14,623,670 4,419,093 NIL 14,623,670 6,263,004 2011-12 6,338,724 - 6,338,724 14,623,670 6,263,004 NIL 9,051,044 5,496,906 ITA NO.209 /AHD/2018 ASST.YEAR 2011-12 - 5 6.2 ADDRESSING THE ISSUE FURTHER, THE LD. A.R SUBMI TTED THAT THE ACTION OF THE ASSESSING OFFICER IN RE-COMPUTING TH E BOOK PROFITS IS FALLACIOUS AND UNREALISTIC IN AS MUCH AS IF THE ASS ESSEE FOLLOWS THE METHODOLOGY ADOPTED BY THE ASSESSING OFFICER AS REF ERRED TO AT PAGE NO. 7 OF ASSESSMENT ORDER, THEN THE TOTAL BROUGHT F ORWARD LOSSES AVAILABLE TO THE ASSESSEE COMPANY AS ON 01.04.2010 STANDS AT A HIGHER FIGURE OF RS. 3,00,78,787/- AS AGAINST THE BROUGHT FORWARD LOSSES AS PER AUDITED BOOKS OF ACCOUNT OF RS. 2,12,22,430/-. IT W AS THUS CONTENDED THAT THE ACTION OF THE A.O IS, IN FACT, DETRIMENTAL TO REVENUE. A REFERENCE TO EXPLANATION (1)(III) WAS MADE AND IT W AS SUBMITTED THAT THE DEDUCTION TO BE ALLOWED UNDER SECTION 115JB IN CALC ULATING THE BOOK PROFIT IS THE LOWER OF THE BROUGHT FORWARD LOSSES OR UNABSORBED DEPRECIATION AS PER BOOKS OF ACCOUNT AND THUS MET HODOLOGY FOLLOWED BY THE ASSESSING OFFICER TOTALLY FAILS AS IT COMPUT ES THE AVAILABLE BROUGHT FORWARD LOSSES AS ON 01.04.2010 AT RS. 3,0 0,78,787/- AS AGAINST ACTUAL BROUGHT FORWARD LOSSES AS PER BOOKS OF ACCOU NT WHICH STANDS AT RS. 2,12,22,430/-. 6.3 LEARNED AR THUS SUBMITTED THAT FOR THE PURPOSES OF QUANTIFICATION OF INCOME TAX LIABILITY UNDER SECTIO N 115JB, ALTHOUGH THE REDUCTION FROM CURRENT YEAR PROFIT TO BE MADE IS TH E LOWER OF BOOK DEPRECIATION OR BOOK LOSS BROUGHT FORWARD FROM EARL IER YEARS, YET FOR THE PURPOSES OF QUANTIFICATION OF CARRY FORWARD OF UNABSORBED LOSS AND DEPRECIATION (AS PER BOOKS) TO THE NEXT ASSESSMENT YEAR, THE ASSESSEE HAS THE OPTION AND LIBERTY TO REDUCE FROM THE CURRE NT YEAR PROFIT, EITHER THE BOOK LOSS OR THE BOOK DEPRECIATION, IRRESPECTIV E OF WHICH ONE IS LOWER ALBEIT TO EXTENT OF LOWER OF THE TWO IN TERMS OF QUANTUM. THE LD. A.R CONTENDED IN ELABORATION THAT THE SCOPE OF ADJU STMENT PROVIDED AS PER THE EXPLANATION IS LIMITED AND OPERATES ONLY FO R THE PURPOSES OF ITA NO.209 /AHD/2018 ASST.YEAR 2011-12 - 6 DECIDING THE QUANTUM OF THE AMOUNT TO BE REDUCED FR OM THE NET PROFIT AS PER BOOKS IN ORDER TO ARRIVE AT THE BOOK PROFIT FOR THE PURPOSE OF QUANTIFICATION OF INCOME TAX LIABILITY UNDER SECTIO N 115JB. THE LD. A.R THUS CONTENDED THAT THE EXPLANATION TO SECTION 115J B IS SILENT AND DOES NOT COMPEL AN ASSESSEE TO REDUCE THE UNABSORBED DEP RECIATION (WHERE IT REPRESENTS LOWER AMOUNT) INSTEAD OF UNABSORBED LOSS (BY THE LOWER FIGURE) AND VICE VERSA. IT MERELY PROVIDES FOR EXTE NT OF DEDUCTION WHICH IS QUANTIFIED TO BE LOWER OF TWO TYPES OF UNABSORBE D ITEMS. THE LD. A.R, ACCORDINGLY EXHORTED THAT THE METHODOLOGY CONS ISTENTLY FOLLOWED BY THE ASSESSEE IN THE MATTER OF ADJUSTING AND SETT ING OFF BROUGHT FORWARD BUSINESS LOSSES AND UNABSORBED DEPRECIATION IN THE BOOKS OF ACCOUNT DOES NOT CALL FOR ANY DISTURBANCE AND THE A SSESSEE SHOULD BE ALLOWED AND BE CONSIDERED ELIGIBLE FOR REDUCTION OU T OF UNABSORBED LOSS AS PER ITS OPTION TO THE EXTENT OF LOWER FIGURE BET WEEN UNABSORBED LOSS AND UNABSORBED DEPRECIATION AS PER THE BOOKS OF ACC OUNT FOR THE PURPOSES OF THE CALCULATING BOOK PROFITS UNDER SECT ION 115JB OF THE ACT. 7. THE LD. DEPARTMENTAL REPRESENTATIVE, ON THE OTHE R HAND, RELIED UPON THE ORDER OF THE ASSESSING OFFICER AND CIT(A) AND SUBMITTED THAT THE EXPLANATION TO SECTION 115JB PROVIDES FOR DEDUC TION OF THE LOWER OF BOOK LOSS OR UNABSORBED DEPRECIATION AS PER BOOKS A ND THEREFORE THE PROPOSITION MADE ON BEHALF OF THE ASSESSEE THAT DED UCTION AMOUNT IS FOR THE PURPOSES OF QUANTIFICATION ALONE IS NOT CORRECT . THE LD. D.R SUBMITTED THAT THE ASSESSING OFFICER HAS RIGHTLY AP PRECIATED THE ISSUE IN PERSPECTIVE WHICH IS IN LINE WITH THE RULING DELIVE RED BY THE AUTHORITY FOR ADVANCE RULINGS IN AAR NO. 652 OF 2004 IN THE C ASE OF RASTRIYA ISPAT NIGAM LTD. DATED 19.07.2006. THE LD. D.R ACCO RDINGLY SUBMITTED THAT NO INTERFERENCE WITH ORDER OF LOWER AUTHORITIE S IS CALLED FOR. ITA NO.209 /AHD/2018 ASST.YEAR 2011-12 - 7 8. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS AND PERUSED THE ORDERS OF THE AUTHORITY BELOW AND CASE LAWS CIT ED. IN THE INSTANT CASE, THE SHORT ISSUE IN CONTROVERSY IS COMPUTATION OF BOOK PROFIT UNDER SECTION 115JB WITH REFERENCE TO EXPLANATION ( 1)(III) BELOW 115JB. THE INTERPRETATION OF EXPLANATION IS THUS IN QUESTI ON. IN THIS BACKDROP, WE TAKE NOTE OF SECTION 115JB OF THE ACT WHICH CONT AINS A SPECIAL MECHANISM I.E. MINIMUM ALTERNATE TAX (MAT) WHEREBY THE TAX LIABILITY OF A CORPORATE ASSESSEE DETERMINED AS PER NORMAL A ND REGULAR PROVISIONS IS TO BE TESTED AGAINST SPECIFIED PERCEN TAGE OF ITS BOOKS PROFITS. CONSEQUENTLY, IF THE REGULAR TAX LIABILIT Y IS LOWER, MAT BECOMES PAYABLE. MAT IS TO BE COMPUTED WITH REFEREN CE TO COMPANIES ACCOUNTING PROFIT FOR THE YEAR AFTER MAKING SPECIFI ED ADJUSTMENTS. ONE OF THE CRITICAL ADJUSTMENT IS DEDUCTION OF LOWER OF BROUGHT FORWARD LOSSES OR UNABSORBED DEPRECIATION AS PER BOOKS OF A CCOUNTS. EXPLANATION (1)(III) TO SECTION 115JB ALSO ENJOINS THAT NO DEDUCTION IS PERMISSIBLE IF EITHER AMOUNT IS NIL. IN A SCENARIO , WHERE A CORPORATE ASSESSEE HAS INCURRED BOOK LOSSES (LOSSES AS PER AC COUNTS SUBJECT TO ADJUSTMENTS) IN THE INITIAL YEARS AND HAS BECOME PR OFITABLE IN LATER YEARS, THE BOOK PROFITS OF LATER YEARS WITH REFEREN CE TO SECTION 115JB SHALL BE COMPUTED AFTER SETTING OFF THE LOWER OF LO SS INCURRED OR DEPRECIATION OF THE EARLIER YEARS REMAINING UNABSOR BED AGAINST THE ACCOUNTING PROFITS/BOOK PROFITS EARNED IN SUCCEEDIN G YEARS. 8.1 IN THIS BACKGROUND, LET US ADVERT TO EXPLANATIO N 1(III) TO SECTION 115JB WHICH ENABLES AN ASSESSEE TO AVAIL DE DUCTION FROM BOOK PROFITS TOWARDS UNABSORBED LOSS/UNABSORBED DEPRECI ATION WHICHEVER IS LESS AS PER BOOKS OF ACCOUNTS. IT WILL BE APPOSITE TO REPRODUCE THE ITA NO.209 /AHD/2018 ASST.YEAR 2011-12 - 8 AFORESAID CLAUSE TO THE EXPLANATION FOR READY REFER ENCE WHICH READS AS UNDER: (III) THE AMOUNT OF LOSS BROUGHT FORWARD OR UNABS ORBED DEPRECIATION, WHICHEVER IS LESS AS PER BOOKS OF ACCOUNT. EXPLANATION.-FOR THE PURPOSES OF THIS CLAUSE,- (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; 8.2 A BARE READING OF THE EXPLANATION QUOTED ABOVE WOULD SHOW THAT CLAUSE (III) TO EXPLANATION 1 TO SECTION 115JB (EXPLANATION IN SHORT) PROVIDES THAT WHILE COMPUTING THE BOOK PROFI TS FOR THE RELEVANT ASSESSMENT YEAR FOR THE PURPOSES OF SECTION 115JB, THE AMOUNT OF LOSS BROUGHT FORWARD OR UNABSORBED DEPRECIATION, WHICHEV ER IS LESS AS PER BOOKS OF ACCOUNTS, IS REQUIRED TO BE REDUCED. 8.3 IN THIS REGARD, IT IS FIRSTLY THE CASE OF THE A SSESSEE THAT IT IS CONSISTENTLY FOLLOWING FIFO METHOD FOR SETTING OFF YEAR-WISE BROUGHT FORWARDED LOSSES. FOLLOWING THIS METHOD, UNABSORBE D LOSS OF EARLIER YEAR, LONGEST OUTSTANDING, IS FIRST SET OFF AGAINST THE CURRENT YEARS BOOK PROFIT AND THEREAFTER IN TANDEM. SECONDLY AND IMPO RTANTLY, WHILE APPLYING THE AFORESAID METHOD, THE ASSESSEE HAD FIR ST ADJUSTED THE BOOK PROFIT OF THE CURRENT YEAR OUT OF BROUGHT FORWARD B USINESS LOSSES ACCUMULATIONS IN PREFERENCE TO THE UNABSORBED DEPRE CIATION (QUANTIFIED TO THE EXTENT OF THE LOWER OF THE TWO) REGARDLESS O F THE FACT THAT AMOUNT SET OFF REPRESENTS UNABSORBED DEPRECIATION BEING A LOWER FIGURE. IT IS THE CASE OF THE ASSESSEE THAT THIS METHOD HAS BEEN ADOPTED CONSISTENTLY ON YEAR TO YEAR BASIS. THE AO, ON THE OTHER HAND, H AS PURPORTEDLY DECLINED TO AGREE WITH THE AFORESAID POLICY OF THE ASSESSEE AND HAS ITA NO.209 /AHD/2018 ASST.YEAR 2011-12 - 9 REVISED THE FIGURES OF SET OFF WHILE COMPUTING THE BOOK PROFIT AS TABULATED. THE CONTROVERSY ESSENTIALLY LIES IN THE MANNER AND METHODOLOGY OF REDUCTION OF CURRENT YEARS PROFITS ADOPTED BY ASSESSEE NECESSARILY OUT OF BROUGHT FORWARD LOSSES IN PREFER ENCE TO UNABSORBED DEPRECIATION (SUBJECT TO QUANTIFICATION OF AMOUNT B EING LOWER OF THE TWO) IRRESPECTIVE OF THE FACT THAT UNABSORBED DEPRE CIATION IS LOWER THAN UNABSORBED LOSSES. 8.4 TO ILLUSTRATE, SUPPOSEDLY THE ASSESSEE HAS CARR IED FORWARD UNABSORBED LOSS OF RS.75 AND UNABSORBED DEPRECIATIO N OF RS.25 FROM THE PRECEDING FINANCIAL YEAR. THE BOOK PROFIT IS, SAY, RS.35 IN THE CURRENT YEAR. THE ASSESSEE HAS REDUCED RS.25/- (BE ING LOWER OF UNABSORBED LOSSES AND UNABSORBED DEPRECIATION) FROM THE BOOK PROFIT AND ADJUSTED THE SAME UNDER UNABSORBED LOSSES AND C ONSEQUENTLY CARRIED FORWARD UNABSORBED LOSS AT RS.50 AND UNABSO RBED DEPRECIATION AT RS.25 IN THE SUCCEEDING ASSESSMENT YEAR AS AN AV AILABLE SET OFF AGAINST THE BOOK PROFIT OF THAT YEAR. WHILE THE AS SESSEE HAS PROPOUNDED THAT THE TAX PAYER IS FULLY ENTITLED TO EXERCISE IT S DISCRETION IN CLAIMING REDUCTION OUT OF UNABSORBED LOSSES IN PREFERENCE TO UNABSORBED DEPRECIATION IN THE ABSENCE OF ANY SPECIFIC SUGGEST ION IN EXPLANATION TO SECTION 115JB, THE REVENUE, ON THE OTHER HAND, SEEK S TO REDUCE THE AMOUNT SO ADJUSTED FROM UNABSORBED DEPRECIATION (BE ING LOWER FIGURE) AND THUS, GRANTS BENEFIT OF CARRY FORWARD UNDER THE HEAD OF UNABSORBED LOSS AT RS.75 AND UNABSORBED DEPRECIATION AT RS.0 (ZERO). THUS, AS ILLUSTRATED, NOTWITHSTANDING THAT THE ASSESSEE HAS RESTRICTED THE QUANTIFICATION OF SET OFF TO BE LOWER TO THE TWO (N AMELY UNABSORBED LOSS AND UNABSORBED DEPRECIATION) BUT, HOWEVER, HAS GIVE N PRIMACY TO UNABSORBED LOSSES IN THE MATTER OF REDUCTION AND QU ANTIFICATION OF ITA NO.209 /AHD/2018 ASST.YEAR 2011-12 - 10 UNABSORBED LOSS IN PREFERENCE TO UNABSORBED DEPRECI ATION AVAILABLE FOR SET OFF IN SUCCEEDING YEAR. FOR DOING SO, IT IS TH E CASE OF THE ASSESSEE THAT IN THE ABSENCE OF ANY PARTICULAR FORM OF METHO DOLOGY PRESCRIBED FOR SET OFF IN THE EXPLANATION AND THUS OWING TO EX PLANATION BEING SILENT TOWARDS THE POSITION OF LAW, THE ASSESSEE, A S PER ITS OPTION, IS ENTITLED TO FIRST REDUCE QUANTUM OF UNABSORBED LOSS ES TO THE EXTENT OF BOOK PROFITS SUBJECT HOWEVER TO THE LOWER OF THE UN ABSORBED DEPRECIATION AS PER ITS BOOKS OF ACCOUNTS. 8.5 ON A CONSPECTUS ON THE FACTS OF THE CASE AND ON PERUSAL OF EXPLANATION, WE DO NOT CONSIDER THE METHODOLOGY ADO PTED BY THE ASSESSEE IN AFFIRMATIVE. THE CONTROVERSY INVOLVES INTERPRETATION OF CLAUSE (III) TO EXPLANATION 1 TO SECTION 115JB. CL AUSE (III) (AS REPRODUCED THE ABOVE) REQUIRES TO BE GIVEN FULL EFF ECT AS PER LETTER AS WELL AS IN SPIRIT. APPARENTLY, IT PROVIDES FOR DED UCTION OF LOWER OF UNABSORBED LOSS OR UNABSORBED DEPRECIATION OUT OF B OOK PROFITS. NOTICEABLY, BENEFIT OF EXPLANATION TO CLAUSE (III) IS NOT AVAILABLE IN THE EVENT EITHER UNABSORBED LOSS OR UNABSORBED DEPRECIA TION BECOMING NIL. THUS, IN THE EVENT WHERE EITHER OF THE TWO BECOMES ZERO, THE ASSESSEE WILL NOT BE ENTITLED FOR SET OFF AGAINST BOOKS PROF ITS AS BENEFICIALLY PROVIDED IN CLAUSE (III) TO EXPLANATION 1. THE SPI RIT OF THE CLAUSE THUS REQUIRES TO BE GAUGED FROM THIS RESTRICTION PLACED STATUTORILY. IF THE METHODOLOGY ADOPTED BY THE ASSESSEE IS ENDORSED, IT MAY GENERALLY DEFEAT A SITUATION WHERE ONE OF THE TWO I.E. UNABSO RBED LOSS AND UNABSORBED DEPRECIATION TURNING NIL. TO GIVE EFFE CT TO THE OBJECT OF CLAUSE (III), WE ARE OF THE VIEW THAT LIKE SHOULD B E REDUCED FROM LIKE AND NOT DIFFERENTLY. THIS MEANS IF THE LOWER OF TH E TWO HAPPENS TO BE UNABSORBED DEPRECIATION, REDUCTION NEED TO BE DONE FROM DEPRECIATION ITA NO.209 /AHD/2018 ASST.YEAR 2011-12 - 11 KITTY AND NOT OUT OF UNABSORBED LOSS. DOING SO WOU LD GIVE FAIR TREATMENT TO THE LANGUAGE EMPLOYED AND WILL BE IN C ONSONANCE WITH THE OBJECT OF CLAUSE (III) FOR THE PURPOSES OF SET OFF. 8.6 AT THIS STAGE, WE ALSO TAKE NOTICE OF THE RULIN G RENDERED BY THE AUTHORITY OF ADVANCE RULINGS IN THE CASE OF RASTRIY A ISPAT NIGAM LTD. (SUPRA) AND FIND THAT ALMOST SIMILAR VIEW HAS BEEN TAKEN BY THE AUTHORITY. WHILE THE RULING MAY NOT NECESSARILY HA VE THE BINDING FORCE, WE ARE PERSUADED TO ADOPT THE VIEW EXPRESSED BY THE AUTHORITY RENDERED AFTER OBJECTIVE ANALYSIS OF FACTS. THUS, ON FIRST PRINCIPLES AND WITHOUT GOING INTO ARITHMETICAL ACCURACY OF WORKING OF CARR Y FORWARD OF SET OFF LOSSES ETC., WE ARE OF THE CLEAR VIEW THAT THE METH ODOLOGY ADOPTED BY THE ASSESSEE TO PRIORITISE SET OFF OF UNABSORBED LO SS REGARDLESS OF UNABSORBED DEPRECIATION BEING LOWER IS NOT IN TUNE WITH THE AIM AND OBJECT OF CLAUSE (III) TO EXPLANATION 1 OF SECTION 115JB OF THE ACT. THE DECISION RENDERED IN THE CASE OF ELI LILLY RELIED U PON BY ASSESSEE DOES NOT PROVIDE ANSWER TO THE CONTROVERSY IN ISSUE. TH E HONBLE DELHI HIGH COURT MERELY FOUND THAT MISTAKE, IF ANY, IS NOT IN THE NATURE OF APPARENTLY MISTAKE AND THUS NOT SUSCEPTIBLE TO RECT IFICATION UNDER S.154 OF THE ACT. THE ISSUE RAISED BY THE ASSESSEE IS THE REFORE DECIDED IN NEGATIVE ON PRINCIPLE. 8.7 AT THIS POINT, WE ALSO OBSERVE THAT ASSESSEE HA S SIMULTANEOUSLY POINTED OUT CERTAIN FACTUAL ERRORS SUCH AS QUANTUM OF CARRY FORWARD LOSS OF RS.3,00,78,787/- AS ON 01.04.2010 AS PER THE MET HOD ADOPTED BY THE AO AS AGAINST THE LOSS AT RS.2,12,22,430/- AS PER T HE BOOKS OF ACCOUNTS OF THE ASSESSEE. WE DO NOT PROPOSE TO GO INTO ARIT HMETICAL ACCURACY OF QUANTUM OF CARRY FORWARD AND RESTRICT OURSELVES TO ADJUDICATE THE ISSUE ITA NO.209 /AHD/2018 ASST.YEAR 2011-12 - 12 ON THE FIRST PRINCIPLES. THE FACTUAL ASPECTS ARE T HUS REMANDED BACK TO THE FILE OF THE AO FOR DETERMINATION OF QUANTIFICAT ION OF SET OFF AS PER THE AFORESAID PRINCIPLE AFTER GIVING PROPER OPPORTU NITY TO THE ASSESSEE IN THIS REGARD. THEREFORE, THE ISSUE IS REMANDED BACK TO THE FILE OF THE AO FOR LIMITED PURPOSES OF APPLYING THE PRINCIPLES NAR RATED ABOVE AND FOR RE-DETERMINATION OF QUANTUM OF UNABSORBED LOSS/DEPR ECIATION AVAILABLE FOR SET OFF IN CURRENT YEAR AND SUCCEEDING YEAR. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMISS ED. THIS ORDER PRONOUNCE D IN OPEN COURT ON 26 / 0 7 / 201 8 SD/- SD/- (SMT. MADHUMITA ROY) (PRADIP KUMAR KEDIA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 26/07/2018 TRUE COPY MUKUL / S K SINHA !'#' / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. &'( ) / CONCERNED CIT 4. )*+ / THE CIT(A)-5, AHMEDABAD 5. ,-. //'(0 '(#0 12& / DR, ITAT, AHMEDABAD 6. .34 5 / GUARD FILE. / BY ORDER, ( DY./ASSTT.REGISTRAR) ) / ITAT, AHMEDABAD