DCIT, CHENNAI V. M/s. Caterpillar India Ltd., CHENNAI

ITA 709/CHNY/2010

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 0832 (ITAT-CHENNAI)
• Duration Of Justice: 2 year(s) 8 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-02-2013
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 14-05-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DR S MOHARANA
• Assessee Lawyers: S SRIDHAR
• Keywords: Depreciation; Advance ruling; Unabsorbed depreciation
• Section: 115JB; 10B; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : CHENNAI [BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI S. S. GODARA, JUDICIAL MEMBER] I.T.A.NO.709/MDS/2010 ASSESSMENT YEAR : 2005-06 THE DY. COMMISSIONER OF INCOME-TAX LARGE TAX PAYER UNIT CHENNAI VS M/S CATERPILLAR INDIA PVT. LTD. ASIA PACIFIC SHARED SERVICES DIVISION RMX NXT CAMPUS 1A, THIRD FLOOR, WHITEFIELD, BANGALORE 560066 [PAN AABCC 4615 K ] (APPELLANT) (RESPONDENT) APPELLANT BY : DR. S. MOHARANA, CIT/DR RESPONDENT BY : SHRI S. SRIDHAR, ADVOCATE DATE OF HEARING : 01-02-2013 DATE OF PRONOUNCEMENT : 12-02-2013 O R D E R PER N.S. SAINI, ACCOUNTANT MEMBER THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE CIT(A), LARGE TAXPAYER UNIT, CHENNAI, DATED 15. 2.2010. I.T.A.NO.709/10 : - 2 - : 2. GROUND NOS.1 & 4 OF THE APPEAL ARE GENERAL IN NATUR E AND HENCE, REQUIRES NO SEPARATE ADJUDICATION BY US. 3. GROUND NO.2 OF THE APPEAL IS DIRECTED AGAINST THE O RDER OF THE CIT(A) IN HOLDING THAT DEDUCTION U/S 10A SHOUL D BE ALLOWED WITHOUT REDUCING THE UNABSORBED DEPRECIATION AND B ROUGHT FORWARD LOSSES OF THE NON 10A UNIT. 4. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSES SEE, IN THE RETURN OF INCOME FILED, CLAIMED DEDUCTION U/S 10A AT ` 2,31,76,14/- WITHOUT SETTING OFF OF BROUGHT FORWARD LOSSES. ACC ORDING TO THE ASSESSING OFFICER, AS PER THE PROVISIONS OF SECTION 10A(6)(II), BROUGHT FORWARD LOSS IF IT PERTAINS TO THE YEAR SUBSEQUEN T TO ASSESSMENT YEAR 2000-01, IS TO BE SET OFF AGAINST THE CURRENT YEA RS PROFITS AND GAINS OF BUSINESS. ACCORDINGLY, THE ASSESSING OFFICER COM PUTED THE DEDUCTION ALLOWABLE TO THE ASSESSEE U/S 10A BY REDUCING THE BROUGHT FORWARD LOSSES FROM EARLIER YEARS I.E ASSESSMENT YEAR 2002- 03 ` , 8,54,17,213/- AND FOR ASSESSMENT YEAR 2003-04 ` 4,72,19,553, TOTALING TO ` 13,22,53,831/-. IN DOING SO, THE TOTAL INCOME OF THE ASSESSEE BECAME NIL AND HENCE, THE ASSESSING OFFICE R HELD THAT NO DEDUCTION U/S 10A WAS ALLOWABLE TO THE ASSESSEE. I.T.A.NO.709/10 : - 3 - : 5. ON APPEAL, THE CIT(A), FOLLOWING THE ORDER OF THE S PECIAL BENCH OF THE TRIBUNAL IN THE CASE OF SCIENTIFIC AT LANTA INDIA TECHNOLOGIES PVT. LTD VS ACIT, IN I.T.A.NO. 229/MDS /2007, I.T.A.NO. 252/MDS/2008 AND I.T.A.NO. 536/MDS/2007, CONSOLIDAT ED ORDER DATED 5.2.2010, WHEREIN IT WAS HELD THAT BUSINESS LOSS OF A NON-ELIGIBLE UNIT WHOSE INCOME WAS NOT ELIGIBLE FOR DEDUCTION U/S 10 A OF THE ACT CANNOT BE SET OFF AGAINST PROFITS OF THE UNDERTAKIN G ELIGIBLE FOR DEDUCTION U/S 10A FOR THE PURPOSES OF DETERMINING THE ALLOWABLE DEDUCTION U/S 10A OF THE ACT., DIRECTED THE ASSESS ING OFFICER TO RE- WROK THE DEDUCTION U/S 10A WITHOUT REDUCING THE UN ABSORBED DEPRECIATION AND BROUGHT FORWARD LOSSES OF THE NON 10A UNIT. 6. BEING AGGRIEVED AGAINST THE SAID ORDER OF THE CIT(A ), THE REVENUE HAS FILED APPEAL BEFORE US. 7. THE CIT/DR VEHEMENTLY ARGUED AND RELIED ON THE DECI SION OF THE KERALA HIGH COURT IN THE CASE OF CIT VS PATSPIN INDIA LTD., [2011] 203 TAXMAN 47(KER.) WHEREIN IT WAS HELD THAT THE HO N'BLE KERALA HIGH COURT AGREED WITH THE VIEW TAKEN BY THE HON'BLE KAR NATAKA HIGH COURT IN THE CASE OF CIT VS HIMATASINGIKE SEIDE, [2006] 2 86 ITR 255(KAR) THAT CARRIED FORWARD DEPRECIATION SHOULD BE SET OFF IN COMPUTATION BOOK PROFIT EVEN DURING THE PERIOD ASSESSEE ENJOYS EXEMPTION U/S 10B(4) OF THE ACT. I.T.A.NO.709/10 : - 4 - : 8. ON THE OTHER HAND, THE A.R OF THE ASSESSEE FILED B EFORE US COPY OF THE ORDER OF THE CHENNAI B BENCH OF THE T RIBUNAL IN THE CASE OF RR DONNELLEY INDIA OUTSOURCE PVT. LTD. VS DCIT, CONSOLIDATED ORDER DATED 6.7.2012 FOR ASSESSMENT YEARS 2005-06 AND 200 6-07, AND SUBMITTED THAT THE ISSUE STANDS COVERED IN FAVOUR O F THE ASSESSEE BY THE SAID ORDER OF THE TRIBUNAL. HE PLACED RELIANCE ON PARA NOS. 4 TO 7 OF THE ORDER OF THE TRIBUNAL. 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RECORD. THE UNDISPUTED FACTS OF THE CASE ARE THAT THE ASSESSEE , DURING THE YEAR UNDER CONSIDERATION, FILED RETURN OF INCOME CLAIMIN G DEDUCTION U/S 10B OF THE ACT AMOUNTING TO ` 2,31,76,141/- WITHOUT REDUCING THE BROUGHT FORWARD LOSSES FROM EARLIER YEARS FROM THE ELIGIBLE UNDERTAKINGS INCOME. THE ASSESSING OFFICER RECOMPUTED THE DEDUC TION ALLOWABLE U/S 10A OF THE ACT AND WHILE DOING SO, HE FOUND THA T AFTER REDUCING THE BROUGHT FORWARD LOSSES FROM EARLIER YEARS, THE ELIG IBLE INCOME FROM THE ELIGIBLE UNDERTAKING U/S 10A WAS NIL. HENCE, HE D ID NOT ALLOW ANY DEDUCTION U/S 10A OF THE ACT TO THE ASSESSEE. TH E ASSESSEE FILED APPEAL BEFORE THE CIT(A) AND THE CIT(A) ALLOWED APP EAL OF THE ASSESSEE FOR THE REASON THAT THE SPECIAL BENCH OF T HE TRIBUNAL IN THE CASE OF SCIENTIFIC ATLANTA INDIA TECHNOLOGIES PVT. LTD VS ACIT(SUPRA) I.T.A.NO.709/10 : - 5 - : HAD HELD THAT DEDUCTION U/S 10A OF THE ACT WAS ALL OWABLE TO THE ASSESSEE WITHOUT SETTING OFF OF BROUGHT FORWARD LOS SES OF EARLIER YEARS OF NON-ELIGIBLE UNITS FROM THE PROFITS OF THE ELIGI BLE UNIT U/S 10A OF THE ACT. 10. THE CIT/DR HAS RELIED ON THE DECISION OF THE HON'BL E KARNATAKA HIGH COURT IN THE CASE OF CIT VS HIMATASI NGIKE SEIDE(SUPRA) WHREIN IT WAS HELD THAT CARRIED FORWARD DEPRECIATIO N SHOULD BE SET OFF IN COMPUTING THE BUSINESS PROFITS OF THE ELIGIBLE U NDERTAKING EVEN DURING THE PERIOD THE ASSESSEE WAS ENJOYING EXEMPT ION U/S 10B(4) OF THE ACT. 11. THE A.R RELIED ON THE DECISION OF THE CHENNAI B B ENCH OF THE TRIBUNAL IN THE CASE OF RR DONNELLEY INDIA OUTS ORCE PVT. LTD VS DCIT(SUPRA), WHEREIN THE TRIBUNAL, AFTER CONSIDERIN G THE DECISION OF THE HON'BLE KARNATAKA HIGH COURT IN THE CASE OF C IT VS HIMATASINGIKE SEIDE (SUPRA) AND THE RECENT DECISION OF THE HON'BL E KARNATAKA HIGH COURT IN THE CASE OF CIT & ANR. VS YOKOGAWA INDIA L TD. AND OTHERS, [2012] 246 CTR (KAR) 226, HAS HELD THAT DEDUCTION U/S 10A OF THE ACT IS ALLOWABLE TO THE ASSESSEE BEFORE SETTING OFF OF BROUGHT FORWARD DEPRECIATION AND LOSSES. THE TRIBUNAL HAS HELD AS UNDER: I.T.A.NO.709/10 : - 6 - : 4. IN THE APPEALS FILED BY THE REVENUE, THE FIRST GROUND IS THAT THE COMMISSIONER OF INCOME-TAX(APPEALS) HAS ERRED I N ALLOWING DEDUCTION UNDER SEC.10A BEFORE SETTING OFF OF BROUGHT FORWARD DEPRECIATION AND LOSSES. THIS ISSUE WAS CO NSIDERED AND DECIDED BY THE INCOME-TAX APPELLATE TRIBUNAL, C HENNAI BENCH IN FAVOUR OF THE ASSESSEE, IN THE CASE OF M/ S. SCIENTIFIC ATLANTA INDIA TECHNOLOGY PVT. LTD. (129 TTJ 273). 5. THE REVENUE HAS REFERRED TO A DECISION OF THE KARNATAKA HIGH COURT RENDERED IN THE CASE OF CIT V. HIMATASINGIKE SEIDE LTD. (286 ITR 255). 6. BUT IN A RECENT DECISION, THE HONBLE KARNATAKA HIGH COURT HAS CONSIDERED THIS ISSUE AND DECIDED IN FAVO UR OF THE ASSESSEE IN THE CASE OF CIT & ANR. VS. YOKOGAWA I NDIA LTD. AND OTHERS, (2012) 246 CTR (KAR) 226. THE SPECIFIC QUESTION CONSIDERED BY THE HIGH COURT IS, WHETHER OR NOT ON THE FACTS AND IN THE CIRCUMSTANCES, CLAIM UNDER SEC.10A IS TO BE ALLOWED ON THE PROFITS OF THE EOU WITHOUT SETTING O FF OF BROUGHT FORWARD LOSSES OF EARLIER YEARS OF THE NON EOU? TH E HONBLE KARNATAKA HIGH COURT AGAIN HAS CONSIDERED SIMILAR I SSUE AND ARRIVED AT THE SAME CONCLUSION IN THE CASE OF CIT & ANR. VS. TATA ELXSI LTD. & OTHERS (247 CTR 334). 7. THEREFORE, IN VIEW OF THE DECISION OF THE ITAT, CHENNAI BENCH AND THE DECISIONS OF THE HONBLE KARNATAKA HI GH COURT, WE HOLD THAT THE COMMISSIONER OF INCOME-TAX(APPEALS ) HAS ARRIVED AT A RIGHT CONCLUSION. THIS ISSUE IS DECID ED AGAINST THE REVENUE. 12. RESPECTFULLY FOLLOWING THE ABOVE QUOTED ORDER OF TH E TRIBUNAL, WE HOLD THAT DEDUCTION U/S 10A IS ALLOWA BLE TO THE ASSESSEE WITHOUT SETTING OFF OF BROUGHT FORWARD LOSSES AND D EPRECIATION AND THEREFORE, THERE IS NO INFIRMITY IN THE ORDER OF T HE CIT(A). IT IS CONFIRMED AND THE GROUND OF APPEAL OF THE REVENUE I S DISMISSED. 13. GROUND NO.3 OF THE APPEAL OF THE REVENUE IS DIRECTE D AGAINST THE ORDER OF THE CIT(A) IN HOLDING THAT BOOK PROFIT SHOULD BE COMPUTED I.T.A.NO.709/10 : - 7 - : AFTER ALLOWING DEDUCTION OF UNABSORBED BOOK LOSS OR UNABSORBED BOOK DEPRECIATION WHICHEVER IS LESS AS CLAIMED BY THE A SSESSEE AND THAT THE CIT(A) HAS FURTHER ERRED IN OBSERVING THAT THE AS SESSEE HAS MADE THE CLAIM FIRST TIME IN THE YEAR UNDER APPEAL. 14. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER OBSERVED FROM THE COMPUTATION OF BOOK PROFIT MADE B Y THE ASSESSEE THAT ASSESSEE HAS REDUCED AN AMOUNT OF ` 114,100,137/- FROM THE CURRENT YEARS BOOK PROFIT AS PER THE PROVISIONS OF SECTION 115JB(2) OF THE ACT AS THE UNABSORBED BOOK LOSS OR UNABSORBED B OOK DEPRECIATION WHICHEVER IS LESS. THE WORKING OF THE BOOK PROFIT BY THE ASSESSEE FOR THE CURRENT YEAR IS REPRODUCED AS UNDER: BOOK PROFIT FOR A.Y 2005-06 (YE 31.3.2005) 54,648, 940 LESS: 1. LOWER OF BUSINESS LOSS/ 114,100,137 UNABSORBED DEPRECIATION 2. INCOME EXEMPT U/S 10A OF THE ACT 35,263, 098 BOOK PROFIT U/S 115JB NIL -------------- BY ANALYZING THE WORKING OF THE UNABSORBED BOOK LOS S OR UNABSORBED BOOK DEPRECIATION WHICHEVER IS LESS AS CLAIMED BY T HE ASSESSEE, IT IS OBSERVED THAT DURING THE AY 2004-05 , THE ASSESSEE HAS SHOWN BOOK PROFIT OF ` 371 , 184,265/- AND SET OFF THE UNABSORBED BOOK LOSS OR UNABSORBED BOOK DEPRECIATION WHICHEVER IS LESS TO T HE EXTENT OF ` I.T.A.NO.709/10 : - 8 - : 248,007 , 446/- AND PAID TAX ON BOOK PROFI T OF ` 123 , 176 , 819/- . HENCE, THE ASSESSEE HAS ASKED TO EXPLAIN WHY THE CLAIM OF UNABSORBED BOOK LOSS OR UNABSORBED BOOK DEPRECIATION WHICHEVER IS L ESS DURING THE CURRENT YEAR TO THE EXTENT OF ` 114,100 , 137/- CANNOT BE DISALLOWED , SINCE THE UNABSORBED BOOK DEPRECIATION WHICH WAS TH E LOWER R AMOUNT DURING THE COMPUTATION OF BOOK PROFIT HAS BE EN COMPLETELY SET OFF DURING THE AY 2004-05 ITSELF AND THERE IS NO UNABSORBED BOOK DEPRECIATION TO SET OFF IN THE CURRENT YEAR . FOR THE BETTER CLEARANCE , THE WORKING OF THE BOOK PROFIT BY THE ASSESSEE DURING THE AY 2004- & CURRENT YEAR (2005-06) I S REPRODUCED AS UNDER : COMPUTATION OF BOOK PROFIT FOR THE AY-2004-05: YEAR ENDED BUSINESS LOSS UNABSORBED TOTAL LOSS LOWER OF DEP/BL DEPRECIATION 31.3 . 2001 92 , 381,133 27,854 , 238 120,235 , 371 27 , 854 , 238 31.3 . 2002 303 , 957 , 537 106,053 , 071 410,010,608 106 , 053 , 071 31 . 3 . 2003 139 , 555,569 114 , 100 , 137 253,655 , 706 114,100 , 137 535 , 894,239 248,007,446 783 , 901 , 685 248 , 007 , 446 BOOK PROFIT FOR A.Y 2004-05 (YE 31.3.2004) 371,184 ,265 LESS: LOWER OF BUSINESS LOSS/UNABSORBED DEPRECIATION 248,007,446 PROFIT SUBJECT TO MAT 123,176,819 I.T.A.NO.709/10 : - 9 - : COMPUTATION OF BOOK PROFIT FOR THE A.Y 2005-06 BOOK PROFIT FOR A.Y 2005-06 (YE 31.3.2005) 54,648, 940 LESS: 1. LOWER OF BUSINESS LOSS/UNABSORBED DEPRECIATION 114,100,137 2. INCOME EXEMPT U/S 10A OF THE ACT 35,263,0 98 BOOK PROFIT U/S 115JB NIL IN RESPONSE TO THE SAME, THE ASSESSEE HAS PRODUCED THE DETAILS OF WORKING OF THE CARRIED FORWA R D LOWER OF BUSINESS LOSS / UNABSORBED DEPRECIATION FOR THE PURPOSE OF COMPUTATION OF THE BOOK PROFIT AS UNDER FOR THE A.Y 2005-06. YEAR ENDED BUSINESS LOSS UNABSORBED DEPRECIATION TOTAL LOSS LOWER OF DEPRECIATION/BL 31.3.2001 0 0 0 0 31.3.2002 147,618,006 0 147,618,006 0 31.3.2003 139,555,569 114,100,137 253,655,706 114,100,137 287,173,575 114,100,137 401,273,712 114,100,137 FROM THE ABOVE WORKING, THE ASSESSEE HAS EMPHASIZED THAT, IT IS ELIGIBLE FOR THE SET OFF OF UNABSORBED DEPRECIATION OF ` 114,100,137/- WHICH WAS THE LOWER AMOUNT AS PER THE SECTION 115JB OF INCOME TAX ACT FOR THE PURPOSE OF COMPUTATION OF TH E BOOK PROFIT OF I.T.A.NO.709/10 : - 10 - : THE CURRENT YEAR. FURTHER, THE ASSESSEE HAS RELIED ON THE DECISION OF THE HONORABLE AUTHORITY FOR THE ADVANCE IN THE CASE OF RASHTRIYA ISPAT NIGAM LIMITED (2851TR 1). THE ABOVE REPLY FURNISHED BY THE ASSESSEE HAS BEEN CAREFULLY CONSIDERED BY THE ASSESSING OFFICER. HE OBSERVED T HAT DURING THE AY 2004-05, THE ASSESSEE HAS SHOWN BOOK PROFIT OF RS. 371,184,265/- AND SET OFF THE UNABSORBED BOOK LOSS OR UNABSORBED BOOK DEPRECIATION WHICHEVER IS LESS TO THE EXTENT O F ` 248,007,446/- AND PAID TAX ON BOOK PROFIT OF RS.123,176,819/- HEN CE, IT IS CLEAR THAT UNABSORBED BOOK DEPRECIATION WHICH WAS THE LOWER A MOUNT EXISTED AS PER THE BOOKS OF THE ASSESSEE HAS BEEN COMPLETE LY WIPED OUT DURING THE AY 2004-05 ITSELF WHILE COMPUTING BOOK P ROFIT AND HENCE, THERE IS NO UNABSORBED BOOK DEPRECIATION IS AVAILAB LE FOR THE ASSESSEE TO SET OFF IN THE YEAR. HENCE, IT IS CLEAR THAT, I N ORDER TO AVAIL THE BENEFIT OF THE UNABSORBED BOOK LOSS OR UNABSORBED D EPRECIATION WHICHEVER IS LESS FOR THE PURPOSE OF COMPUTATION OF BOOK PROFIT DURING THE CURRENT HE ASSESSEE HAS REINSTATED THE AVAILABL E BOOK LOSS & BOOK DEPRECIATION, WHICH IS NOT PERMISSIBLE AS PER THE P ROVISION OF THE SECTION 115JB OF THE INCOME-TAX ACT. HE, THEREFORE , DISALLOWED THE CLAIM OF THE ASSESSEE. I.T.A.NO.709/10 : - 11 - : 15. BEING AGGRIEVED, THE ASSESSEE FILED APPEAL BEFORE THE CIT(A) AND SUBMITTED AS UNDER: 'THE LAST ISSUE IN THE APPEAL IS THE AVAILABILITY O F LOWER OF BUSINESS LOSS OR UNABSORBED DEPRECIATION AS PER BOO KS OF ACCOUNTS AVAILABLE TO BE REDUCED FROM BOOK PROFITS FOR THE PURPOSE OF COMPUTATION OF INCOME LIABLE FOR TAX U/S 115JB. THE ASSESSING OFFICER HAS GONE WRONG IN NOT TAKING INTO ACCOUNT THE TOTAL LOSS AS PER THE BOOKS OF ACCOUNTS OF THE EPOETTETN AS ON THE FIRST DAY OF PREVIOUS YEAR RELE VANT TO THE ASSESSMENT YEAR 2005-06. THE BREAK-UP OF THE PROFIT & LOSS ACCOUNT AS ON 31 ST MARCH 2004 IS AS UNDER:- (AMOUNT IN RS '000S OF RUPEES) YEAR ENDED BUSINESS DEPRECIATION TOTAL LOSS LOSS 31032002/01-04- 2002 158015/- 0 158015/- I 31-03-2003/01-04- 2003 139555/- 114100/- 253655/- TOTAL 297570/- 114100/- 411670/- THE LEAST OF THE BUSINESS LOSS OR DEPRECIATION LOSS VIZ., RS.114,100,000/- HAS BEEN CORRECTLY CLAIMED FROM TH E BOOK PROFITS FOR THE PURPOSE OF COMPUTATION OF INCOME LI ABLE TO BE TAXED U/S 115JB. EVEN THE AUTHORITY FOR ADVANCE RULING IN THE CASE O F RAJSRIYA ISPAT NIGAM LTD. 285 ITR 1 HAS HELD THAT IN SO FAR AS FROM THE NET PROFITS OF THE RELEVANT PREVIOUS YEAR WHAT IS REQUIRED TO BE REDUCED IS ONLY BROUGHT FORWARD LOSS OR UNABSORBED DEPRECIATION WHICHEVER IS LESS AS PER BOOKS OF ACCOUNTS . THEREFORE THE STARTING POINT FOR COMPUTA TION WOULD BE TO SPLIT THE TOTAL LOSS AS APPEARING IN TH E BALANCE SHEET BETWEEN BUSINESS LOSS AND DEPRECIATION LOSS A ND TO REDUCE THE LEAST OF THE TWO. THE GENERAL PRINCIPLES OF AND ACCOUNTANCY HAS TO BE FOLLOWED TO ARRIVE AT THE BAL ANCE OF BROUGHT FORWARD LOSS AND DEPRECIATION IN THE EVENT OF THE COMPANY MAKING A PROFIT DURING AN ACCOUNTING YEAR WHICH HAS TO BE REDUCED FROM THE OPENING BALANCE OF THAT YEAR. THIS IS WHAT THE DECISION OF THE HON'BLE AUTHORITY FOR ADVANCE RULING IN THE CASE MENTIONED ABOVE HAS RULE D. DOING SO, THE FOLLOWING SITUATION WOULD EMERGE. I.T.A.NO.709/10 : - 12 - : BREAK-UP OF PROFIT & LOSS ACCOUNT BALANCE AS ON 01.04.2003: (AMO UNTS IN ` 000S OF RUPEES) YEAR ENDING BUSINESS LOSS UNABSORBED DEPRECIATION TOTAL LOSS ADJUSTMENT 31.3.2001 92381/- 27854/- 120235/- FULLY ADJUSTED IN 31.3.2004 31.3.2002 303957/- 106053/- 410010/- DEPRECIATION FULLY ADJUSTED & BUSINESS LOSS ADJUSTED PARTLY 31.3.2003 139556/- 114100/- 253656/- 31.3.2004 + 372230/- 0 BUSINESS LOSS OF 31.3.2001 92381000/- UNABSORBED DEPRECIATION OF 31.3.2001 278554000/- UNABSORBED DEPRECIATION OF 31.3.2002 106053000/- BUSINESS LOSS OF 31.3.2003 145942000/- THE APPELLANT HAS CLAIMED THE LEAST OF ALL VIZ., RS .114, 100,000/ IN THE COMPUTATION U/S 115JB, THIS IS SUPPORTED BY THE DECISION CITED ABOVE. UNDER GENERAL PRINCIPLES OF LAW AND AC COUNTANCY THE PROFITS OF THE YEAR WOULD GO TO WIPE OFF THE EN TIRE LOSS OF THE EARLIEST EAR AND SO ON AND NOT ONLY UNABSORBED DEPRECIATION AS ADOPTED BY THE ASSESSING OFFICER , IS COMMON COMMER CIAL PRACTICE THAT THE CREDIT IN A SUBSEQUENT YEAR WOULD BE UTILIZED TO WIPE OUT THE EARLIEST DEBIT AND SO ON. IF ANY SUPPORT IS NEEDED FOR THIS PREPOSITION, THE RULE IN CLAYTON'S CASE UNDER NEGOTIABLE INSTRUMENTS ACT WHICH LAYS DOWN THE PREPOSITION THA T IN A CUSTOMER'S ACCOUNT HAVING SEVERAL DEBIT ENTRIES, TH E CREDIT ENTRY APPEARING THEREAFTER WOULD ONLY WIPE O UT OR ADJUSTABLE AGAINST THE EARLIEST DEBIT IN POINT OF T IME. IT IS THEREFORE SUBMITTED THAT THE ASSESSING OFFICER'S RE-COMPUTATI ON IS FULLY UNJUSTIFIED.' 16. THE CIT(A), AFTER CONSIDERING THE SUBMISSIONS, HAS HELD AS UNDER: I.T.A.NO.709/10 : - 13 - : 5.1 I HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS AND THE MATERIAL ON RECORD. I HAVE ALSO GONE THROUGH THE DE CISION OF THE HON'BLE AAR IN RASTRIYA ISPAT NIGAM LTD 285 ITR 1 ( AAR) I HAVE ALSO GONE THROUGH THE WORKING GIVEN BY THE APPELLAN T AS WELL AS THE METHODOLOGY FOLLOWED IN SUCH CALCULATION. I FIN D THE ONLY DIFFERENCE BETWEEN THE TWO DIFFERENT METHODS FOLLOW ED, ONE AS SET OUT BY THE A.O IN THE ASSESSMENT ORDER AND THE OTHER AS FURNISHED BY THE APPELLANT, IS THAT WHILE IN THE FO RMER METHOD THE ASSESSING OFFICER HAS TAKEN INTO ACCOUNT THE ACTUAL AMOUNTS ALLOWED IN THE ASSESSMENT IN VARIOUS EARLIER YEARS WHEREAS THE APPELLANT WORKS OUT THE SAME ON THE BASIS OF THE FI GURES AS APPEARING IN THE BOOKS OF ACCOUNTS OF THE APPELLANT . IT WAS VEHEMENTLY ARGUED ON BEHALF OF THE APPELLANT THAT T HE PROVISIONS OF SECTION 115 JB HAVE BEEN HELD TO BE A SPECIFIC C ODE BY ITSELF AND HAS TO BE WORKED OUT ON THE BASIS OF THE PROVIS IONS CONTAINED IN THE SAID SECTION. IT WAS, THEREFORE, A RGUED THAT WHEN THE LEGISLATURE IN ITS WISDOM HAS THOUGHT IT FIT TO ALLOW THE LOWER OF THE UNABSORBED BUSINESS LOSSES OR UNABSORBED DEP RECIATION AS PER BOOKS OF ACCOUNTS, THE AO IS DUTY BOUND TO T AKE INTO ACCOUNT SUCH FIGURES AS APPEARING IN THE AUDITED AC COUNTS PREPARED IN ACCORDANCE WITH PARTS I AND 11 OF SCHED ULE VI FOR THE RELEVANT PREVIOUS YEAR AND BIFURCATE THE SAME B ETWEEN BUSINESS LOSSES AND DEPRECIATION LOSSES AND ALLOW T HE LOWER OF THE TWO TO BE REDUCED FROM THE BOOK PROFITS TO ARRI VE AT 115JB INCOME. THIS CONTENTION OF THE APPELLANT APPEARS TO BE THE CORRECT VIEW AS IT IS A SETTLED PROPOSITION OF LAW THAT SECTION 115 JB IS A SEPARATE CODE BY ITSELF AND HAS TO BE WORKE D WITHOUT TAKING INTO ACCOUNT THE ADJUSTMENTS SPECIFIED IN EX PLANATION 1 OF 115JB(2) OF THE ACT AND ON THE BASIS OF THE FIGURES AS APPEARING IN THE AUDITED ACCOUNTS PREPARED IN ACCORDANCE WITH PARTS I AND II OF SCHEDULE VI OF THE COMPANIES ACT, 1956. REFERENC E IN THIS REGARD MAY BE MADE TO THE RULING OF AAR IN RASTRIYA ISPAT NIGAM LTD (SUPRA) WHEREIN THE HON'BLE AAR HAS STATED AS U NDER: 'SECTION 115JB COMPUTATION MUST FOLLOW THE LOGIC ON INTERNAL CONSISTENCY AND REGULARITY YEAR AFTER YEAR , UNAFFECTED BY THE PARALLEL COMPUTATIONS RUNNING UNDER THE COMPANIES ACT AND THE NORMAL PROVISIONS OF THE INCOME- TAX ACT. REDUCTION MADE TO BOOK LOSS OR BOOK DEPRECIATION IN ANY PARTICULAR YEAR UNDER THE MINIMUM ALTERNATE TAX (MAT) PROVISIONS MUST FORM A NECESSARY BASIS FOR COMPUTATION OF 'MAT' LIABILITY FOR THE SUBSEQUENT YEAR, IRRESPECTIVE OF THE TREATMENT GIVEN UNDER THE COMPANIES ACT, OR, FOR THAT MATTER, UNDER THE NORMAL PROVISIONS OF THE I.T.A.NO.709/10 : - 14 - : INCOME-TAX ACT. THE ABOVE INTERPRETATION IS STRONGL Y SUPPORTED BY CIRCULAR NO. 495 DATED SEPTEMBER 22, 1987 (SEE [1987) 168 ITR (ST.) 87, 111.' IT WAS FURTHER STATED BY THE ID. AR THAT COMPUTATIO N U/S 115JB HAS BEEN MADE FOR THE FIRST TIME IN THE YEAR UNDER APPEAL. THE DETAILED WORKING FURNISHED BY THE APPELLANT BEING I N ACCORDANCE WITH PROVISIONS OF S. 115JB CANNOT BE HELD TO BE UN ACCEPTABLE OR INCORRECT IN LAW. ACCORDINGLY, THE AO IS DIRECTED T O ADOPT THE FIGURES AS PER THE AUDIT REPORT AFTER DUE VERIFICAT ION. THE APPELLANT THEREFORE SUCCEEDS ON THIS ISSUE. 17. THE CIT/DR SUBMITTED THAT IT WILL BE OBSERVED FROM THE ASSESSMENT ORDER THAT THE ASSESSEE HAD CLAIMED DEDU CTION OF UNABSORBED DEPRECIATION OR BUSINESS LOSS IN THE IMM EDIATELY PRECEDING ASSESSMENT YEAR 2004-05 WHILE COMPUTING DEDUCTION U/S 115JB OF THE ACT AS EVIDENT FROM THE WRITTEN SUBMISSION FILED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER AND WHICH IS REPRODUCE D IN PAGES 5,6 AND 7 OF THE ORDER. THEREFORE, HE SUBMITTED THAT THE O BSERVATION OF THE CIT(A) IN HIS ORDER THAT THE ASSESSEE HAS CLAIMED THE DEDUCTION FOR THE FIRST TIME WAS NOT CORRECT. HE FURTHER POINTED OUT THAT IT MAY BE SEEN FROM THE ASSESSMENT ORDER AT PAGE 6 WHEREIN WR ITTEN SUBMISSION OF THE ASSESSEE IS QUOTED THAT WHILE COMPUTING THE BOOK PROFIT FOR ASSESSMENT YEAR 2004-05 THE TOTAL BUSINESS LOSS WAS ` 535,894,239/- TOTAL OF UNABSORBED DEPRECIATION AND LOWER OF DEPRE CIATION/BUSINESS LOW ` 248,007,446/-. THE ASSESSEE DEDUCTED ` 248,007,446/- FROM I.T.A.NO.709/10 : - 15 - : THE BOOK PROFIT OF ` 371,184,265/- AND ARRIVED AT THE BOOK PROFIT SUBJECT TO MAT AT ` 123,176,819/-. THUS, THE ENTIRE UNABSORBED DEPRECIATION TO BE CARRIED FORWARD IN ASSESSMENT YE AR 2005-06 HAD BECOME NIL. IN THE PRESENT YEAR THE ASSESSEE WAS HAVING ONLY BROUGHT FORWARD BUSINESS LOSS AND THERE WAS NO BROU GHT FORWARD DEPRECIATION AND HENCE, THE LOWER OF THE BROUGHT FO RWARD LOSSES AND BUSINESS LOSS BEING NIL, THE ASSESSING OFFICER DID NOT ALLOW ANY DEDUCTION TO THE ASSESSEE FROM THE BOOK PROFITS. THE ASSESSING OFFICER OBSERVED THAT THIS IS AS PER PROVISIONS OF SECTION 115JB(2) OF THE ACT. THE CIT/DR FURTHER SUBMITTED THAT THE ABO VE ACTION OF THE ASSESSING OFFICER IS SUPPORTED BY THE DECISION OF T HE CHENNAI A BENCH OF THE TRIBUNAL IN THE CASE OF M/S HINDUSTAN POWERP LUS LTD. VS THE DY. CIT, IN I.T.A.NOS.920 TO 922/MDS/2005, CONSOLIDATED ORDER DATED 31.1.2007, WHEREIN THE TRIBUNAL HAS HELD AS UNDER: 10 . WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAR EFULLY AND HAVE GONE THROUGH THE RELEVANT MATERIAL ON RECO RD. CLAUSE (III) OF EXPLANATION TO SECTION 115JA(2) IS AS UNDER: '(III) THE AMOUNT OF LOSS BROUGHT FORWARD OR UNABSORBED DEPRECIATION WHICHEVER IS LESS AS PER BOOKS OF ACCOUNT. ' (EMPHASIS SUPPLIED) 11. A PLAIN READING OF THE ABOVE PROVISION SHOWS T HAT BROUGHT FORWARD LOSSES OR UN ABSORBED DEPRECIATION HAS TO B E REDUCED AS PER THE BOOKS OF ACCOUNT. THEREFORE, THERE DOES NOT SEEM TO BE ANY CONTROVERSY. IF DEPRECIATION HAS BEEN ADJUSTED AGAI NST THE PROFITS I.T.A.NO.709/10 : - 16 - : OF THE INTERMEDIATE YEAR WHEN THERE WERE PROFITS, T HEN NO FAULT CAN BE FOUND IN THE WORKING GIVEN BY THE ASSESSING OFFICER, WE CANNOT ADOPT AN INTERPRETATION IGNORING THE SPECIFI C MANDATE OF THE ACT. HAD THE WORDS 'AS PER THE BOOKS OF ACCOUNT' NO T BEEN THERE IN CLAUSE (III) OF EXPLANATION, THEN PERHAPS THE SUBMI SSION OR THE ID. COUNSEL OF THE ASSESSEE WAS CORRECT. IN VIEW OF THE SE WORDS, THE ASSESSING OFFICER HAS CORRECTLY WORKED OUT THE CARR Y FORWARD BUSINESS LOSS OR UNABSORBED DEPRECIATION AT NIL, BE CAUSE HE HAS FOUND THAT DEPRECIATION ALREADY STOOD REDUCED. IN T HESE CIRCUMSTANCES, WE FIND NOTHING WRONG WITH THE ORDER OR THE ID. CIT(APPEALS) AND CONFIRM THE SAME. 18. HE FURTHER SUBMITTED THAT THE AUTHORITY FOR ADVANCE RULINGS IN THE CASE OF RASHTRIYA ISPAT NIGAM LTD., IN RE, [ 2006] 204 CTR (AAR) 153, ALSO SUPPORTS THE VIEW OF THE ASSESSING OFFICER. THE AUTHORITY FOR ADVANCE RULINGS HAS HELD THAT THE PRI NCIPLES GOVERNING COMPUTATION WITHIN A PARTICULAR STREAM ARE STRICTLY ADHERED TO IN EVERY SUCCESSIVE YEAR. ON THE SAME PRINCIPLE, SECTION 11 5JB COMPUTATION MUST FOLLOW THE LOGIC OF INTERNAL CONSISTENCY AND R EGULARITY YEAR AFTER YEAR, UNAFFECTED BY THE PARALLEL COMPUTATIONS RUNNI NG UNDER THE COMPANIES ACT AND THE NORMAL PROVISIONS OF THE INC OME-TAX ACT. REDUCTION MADE TO BOOK LOSS OR BOOK DEPRECIATION IN ANY PARTICULAR YEAR UNDER THE MAT PROVISIONS MUST FORM A NECESSARY BASIS FOR COMPUTATION OF MAT LIABILITY FOR THE SUBSEQUENT Y EAR, IRRESPECTIVE OF THE TREATMENT GIVEN UNDER THE COMPANIES ACT, OR, FO R THAT MATTER, UNDER THE NORMAL PROVISIONS OF THE INCOME-TAX ACT. THE ABOVE INTERPRETATION IS STRONGLY SUPPORTED BY CIRCULAR NO . 495 DATED 22ND I.T.A.NO.709/10 : - 17 - : SEPTEMBER, 1987. CONTENTION THAT CIRCULAR NO. 495 H AVING BEEN ISSUED UNDER SECTION 115J WOULD NOT BE APPLICABLE TO THE A MENDED PROVISIONS AS CONTAINED UNDER SECTION 115JB IS NOT SUSTAINABL E FOR THE SIMPLE REASON THAT THOUGH PROVISIONS FOR WORKING OUT THE ' BOOK PROFIT' AS CONTAINED IN THE EXPLANATION HAVE UNDERGONE LITTLE CHANGE, THE BASIC PROVISIONS PRACTICALLY REMAIN THE SAME. INSOFAR AS FROM THE NET PROFIT OF THE RELEVANT PREVIOUS YEAR WHAT IS REQUIRED TO B E REDUCED IS ONLY BROUGHT FORWARD LOSS OR UNABSORBED DEPRECIATION, WHICHEVER IS LESS AS PER THE BOOKS OF ACCOUNT.-S URYALATHA SPINNING MILLS LTD. VS. UNION OF INDIA (1997) 223 ITR 713 (AP) APPLIED. 19. HE ARGUED THAT IT WAS FURTHER HELD THAT A COMPUTAT ION UNDER SECTION 115JB, AS FAR AS THE FIGURES OF BOOK LOSS O R BOOK DEPRECIATION BROUGHT FORWARD FROM EARLIER YEAR OR YEARS ARE CONC ERNED, MUST START WITH THE FIGURES OF SIMILAR COMPUTATION MADE UNDER SECTION 115JB IN THE IMMEDIATELY PRECEDING YEAR. STARTING FROM ANY O THER POINT, AS ATTEMPTED TO BY THE APPLICANT, WOULD BE AGAINST THE PRINCIPLES OF CONSISTENCY AND REGULARITY. SECTION 115JB DOES STIP ULATE THAT COMPUTATION UNDER THE SECTION SHOULD START FROM ACC OUNTS PREPARED UNDER THE COMPANIES ACT FOR THE RELEVANT PREVIOUS Y EAR, BUT THAT IS ONLY FOR THE PURPOSE OF WORKING OUT NET PROFIT UNDE R SUB-SECTION (2). FURTHER, GIVEN THE SPECIFIC PROVISIONS OF SUB-CLAUS E (III) OF THE I.T.A.NO.709/10 : - 18 - : EXPLANATION THE NET PROFIT SO ARRIVED AT HAS TO BE REDUCED BY BOOK LOSS OR BOOK DEPRECIATION (WHICHEVER IS LESS) OF THE PRECEDING YEARS AS PER ACCOUNTS PREPARED UNDER THE COMPANIES ACT AND AS MO DIFIED BY REDUCTION, IF ANY, MADE UNDER SECTION 115JB FOR EAR LIER YEAR OR YEARS. IF THE PROVISIONS OF S. 115JB TREAT BOOK LOSS BEFOR E DEPRECIATION AND DEPRECIATION CLAIM ITSELF AS DISTINCT, THEN THE ACCOUNTS PREPARE D UNDER THE COMPANIES ACT MUST BE MODIFIED, WHEREVER NECESS ARY, TO COMPLY WITH THE PROVISIONS OF SECTION 115JB, FOR COMPUTATI ON OF MAT . 20. IT WAS FURTHER OBSERVED THAT THE APPLICANT DOES NOT HAVE THE OPTION TO REDUCE THE CURRENT YEAR'S PROFIT BY THE LOSS BROUGHT FORWARD OR UNABSORBED DEPRECIATION (FOR THE PURPOSE OF CARRY FORWARD UNDER SECTION 115JB), IN ITS ACCOUNTS, IN A MANNER DIFFERENT FROM THE MANNER ADOPTED FOR DETERMINATION OF 'BOOK PROFIT' UNDER SECTION 115JB. THE APPLICANT DOES NOT HAVE THE DISCRETION TO REDUCE THE CURRENT YEAR ' S PROFIT EITHER BY THE LOSS BROUGHT FORWARD OR UNABSORBED DEPRECIATION. THE LESSER OF THE TWO IS REQUIRED TO BE REDUCED FROM THE CURRENT YEAR' S INCOME. AFTER MAKING THE REDUCTION IN ONE YEAR, THE APPLICANT C ANNOT ADOPT A DIFFERENT METHOD IN THE SUBSEQUENT YEARS. THE APPLICANT CANNOT REDUCE THE CURRENT YEAR'S PROF I T PARTLY BY THE BUSINESS LOSS BROUGHT FORWARD AND PARTLY BY UNABSORBED DEPRECIATION . THE I.T.A.NO.709/10 : - 19 - : APPLICANT HAVING DISCLOSED THE AGGREGATE LOSS COMPRI SING OF LOSS BROUGHT FORWARD AND UNABSORBED DEPRECIATION AS A CONSOLIDATED FIGURE IN ITS P&L A/C FOR THE PURPOSE OF CALCULATING THE BOOK PROFIT UNDER SECTION 115JB IS REQUIRED TO BIFURCATE SUCH CONSOLIDATED LOSS I NTO LOSS BROUGHT FORWARD AND UNABSORBED DEPRECIATION BUT CANNOT AVAIL OF THE BENEFIT OF REDUCTION ENVISAGED UN DER SUB - SECTION (2) OF SECTION 115JB IN A MANNER DIFFERENT FROM THE ONE PRESCRIBED UNDER THE ACT , SO AS TO BE MORE BENEFICIAL TO THE APPLICANT. IT IS NOT OPEN TO THE APPLICANT TO REDUCE T HE CURRENT YEAR ' S PROFIT BY THE LOSS BROUGHT FORWARD OR UNABSORBED DEPRECIATION IN A MANNER MORE BENEFIC I AL TO THE APPLICANT AND SUCH ADJUSTMENT CANNOT BE CHANGED FROM YEAR TO YEAR. THE APPLICANT CANNOT CHANGE THE METHOD OF REDUCING THE CURR ENT YEAR'S PROFIT BY THE LOSS BROUGHT FORWARD OR UNABSORBED DEPRECIATION FROM YEAR TO YEAR. THIS WOULD AMOUNT TO CHANGE IN THE METHOD OF ACCOUNTING FOR THE PURPOSES OF S . 115JB, WHICH IS NOT PERMISSIBLE. 21. ON THE OTHER HAND, THE A.R SUPPORTED THE ORDER OF T HE CIT(A). 22. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RECORD. IN THE I.T.A.NO.709/10 : - 20 - : INSTANT CASE, THE DISPUTE WHICH REQUIRES ADJUDICATI ON BY US IS ABOUT THE AMOUNT WHICH IS DEDUCTIBLE UNDER CLAUSE(III) OF EXP LANATION TO SECTION 115JB(2) OF THE ACT FOR COMPUTING BOOK PROFIT OF TH E YEAR UNDER CONSIDERATION. THE RELEVANT CLAUSE (III) READS AS UNDER: (III) THE AMOUNT OF LOSS BROUGHT FORWARD OR UNABSO RBED 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; OR] 23. THE UNDISPUTED FACTS RELATING TO THE ABOVE ISSUE AR E THAT THE ASSESSEE SUFFERED LOSSES AS PER ITS BOOKS OF ACCOUN T FOR THE ASSESSMENT YEARS 2001-02 TO 2003-04 AND EARNED INCO ME AS PER BOOKS OF ACCOUNT IN THE ASSESSMENT YEAR 2004-05. T HE BIFURCATION OF LOSSES AS PER BOOKS FOR THE ASSESSMENT YEARS 2001-0 2 TO 2003-04 ARE TABULATED AS UNDER: ASSESSMENT YEAR TOTAL LOSS UNABSORBED DEPRECIATION CASH LOSS 2001-02 120,235,371 27,854,238 92,381,133 2002-03 410,010,608 106,053,071 303,957,537 2003-04 253,655,706 114,100,137 139,555,569 I.T.A.NO.709/10 : - 21 - : 24. IT IS NOT IN DISPUTE THAT IN ASSESSMENT YEAR 2004-0 5, THE BOOK PROFIT OF THE ASSESSEE BEFORE ALLOWING DEDUCT ION UNDER CLAUSE (III) OF EXPLANATION TO SECTION 115JB WAS ` 371,184,265/- AND THE ASSESSEE WAS ALLOWED DEDUCTION OF ` 248,007,446/- UNDER CLAUSE (III) FOR COMPUTING THE BOOK PROFIT OF THE ASSESSMENT YEA R 2004-05. NOW, IN THE YEAR CONSIDERATION I.E ASSESSMENT YEAR 2005- 06, THE ASSESSEES BOOK PROFIT BEFORE ALLOWING DEDUCTION UNDER CLAUSE (III) OF SECTION 115JB IS ` 54,648,940/-. ALL THE ABOVE FACTS ARE NOT IN DISP UTE. THE ONLY DISPUTE IS THAT AS PER THE ASSESSEE, THE ASS ESSEE IS ENTITLED FOR DEDUCTION OF ` 114,100,137/- UNDER CLAUSE (III) OF EXPLANATION TO SECTION 115JB(2) IN THE YEAR UNDER CONSIDERATION WH EREAS ACCORDING TO THE DEPARTMENT, SUCH AMOUNT COMES TO NIL. THE ONLY DIFFERENCE BETWEEN THE COMPUTATION OF THE ASSESSEE AND THE DE PARTMENT IS THAT THE DEPARTMENT TREATED THE ENTIRE ` 248,007,446/- AS SET OFF OF UNABSORBED DEPRECIATION AND THEREBY TREATED THE BRO UGHT FORWARD UNABSORBED DEPRECIATION AT NIL WHEREAS THE ASSESSE E HAS TREATED THE DEDUCTION ALLOWED IN COMPUTATION OF BOOK PROFIT OF THE ASSESSMENT YEAR 2004-05 AS SET OFF OF ENTIRE TOTAL LOSS OF ASS ESSMENT YEAR 2001-02 OF ` 120,235,371/- AND SET OFF OF ENTIRE UNABSORBED DEP RECIATION OF THE ASSESSMENT YEAR 2002-03 OF ` 106,053,071/- AND BALANCE OF ` 156,339,531/- AS SET OFF OF CASH LOSS OF ASSESSMENT YEAR 2002-03. I.T.A.NO.709/10 : - 22 - : THUS, ACCORDING TO THE ASSESSEE, DEPRECIATION LOSS OF ASSESSMENT YEAR 2003-04 AND PART OF CASH LOSS OF ASSESSMENT YEAR 20 02-03 AND ENTIRE CASH LOSS OF ASSESSMENT YEAR 2003-04 REMAINED CARRI ED FORWARD. ACCORDING TO THE ASSESSEE, CLAUSE (III) ONLY PROVI DES THAT WHAT AMOUNT WILL BE ALLOWED AS SET OFF WHICH IS LESSER OF BROUG HT FORWARD LOSSES OR UNABSORBED DEPRECIATION AS PER BOOKS, BUT DOES NOT PROVIDE FOR SUBSEQUENT YEARS HOW BROUGHT FORWARD LOSSES AND BRO UGHT FORWARD UNABSORBED DEPRECIATION WILL BE COMPUTED. ACCORDIN G TO THE ASSESSEE, AS PER GENERAL ACCOUNTING PRINCIPLES AND COMMERCIAL LAW, ANY SUBSEQUENT PROFIT WILL BE SET OFF AGAINST THE E ARLIER LOSSES AND THIS NORMAL ACCOUNTING POLICY AND COMMERCIAL LAW HAS NOT BEEN DISTURBED BY THE PROVISIONS OF CLAUSE (III). THE ASSESSEE R ELIED UPON THE RULE IN CLAYTONS CASE UNDER NEGOTIABLE INSTRUMENTS ACT WHI CH LAYS DOWN THE PROPOSITION THAT IN A CUSTOMERS ACCOUNT HAVING SEV ERAL DEBIT ENTRIES, THE CREDIT ENTRY APPEARING THEREAFTER WOULD ONLY WI PE OUT OR ADJUSTABLE AGAINST THE EARLIEST DEBIT IN POINT OF TIME. 25. THE CIT/DR, ON THE OTHER HAND, RELIED UPON THE DECI SION OF AUTHORITY FOR ADVANCE RULINGS IN THE CASE OF RASHTR IYA ISPAT NIGAM LTD. IN RE, [2006] 281 ITR 1 (AAR) AND THE CONSOLIDATED ORDER DATED 31.1.2007 OF THE CHENNAI A BENCH OF THE TRIBUNAL IN THE CASE OF M/S I.T.A.NO.709/10 : - 23 - : HINDUSTAN POWERPLUS LTD. VS THE DY. CIT, IN I.T.A.N OS. 920 TO 922/MDS/2005. 26. WE FIND THAT THIS TRIBUNAL IN THE CASE OF M/S HINDU STAN POWERPLUS LTD (SUPRA) HAS HELD AS UNDER: 10 . WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAR EFULLY AND HAVE GONE THROUGH THE RELEVANT MATERIAL ON RECO RD. CLAUSE (III) OF EXPLANATION TO SECTION 115JA(2) IS AS UNDER: '(III) THE AMOUNT OF LOSS BROUGHT FORWARD OR UNABSORBED DEPRECIATION WHICHEVER IS LESS AS PER BOOKS OF ACCOUNT. ' (EMPHASIS SUPPLIED) 11. A PLAIN READING OF THE ABOVE PROVISION SHOWS T HAT BROUGHT FORWARD LOSSES OR UN ABSORBED DEPRECIATION HAS TO B E REDUCED AS PER THE BOOKS OF ACCOUNT. THEREFORE, THERE DOES NOT SEEM TO BE ANY CONTROVERSY. IF DEPRECIATION HAS BEEN ADJUSTED AGAI NST THE PROFITS OF THE INTERMEDIATE YEAR WHEN THERE WERE PROFITS, T HEN NO FAULT CAN BE FOUND IN THE WORKING GIVEN BY THE ASSESSING OFFICER, WE CANNOT ADOPT AN INTERPRETATION IGNORING THE SPECIFI C MANDATE OF THE ACT. HAD THE WORDS 'AS PER THE BOOKS OF ACCOUNT' NO T BEEN THERE IN CLAUSE (III) OF EXPLANATION, THEN PERHAPS THE SUBMI SSION OR THE ID. COUNSEL OF THE ASSESSEE WAS CORRECT. IN VIEW OF THE SE WORDS, THE ASSESSING OFFICER HAS CORRECTLY WORKED OUT THE CARR Y FORWARD BUSINESS LOSS OR UNABSORBED DEPRECIATION AT NIL, BE CAUSE HE HAS FOUND THAT DEPRECIATION ALREADY STOOD REDUCED. IN T HESE CIRCUMSTANCES, WE FIND NOTHING WRONG WITH THE ORDER OR THE ID. CIT(APPEALS) AND CONFIRM THE SAME. 27. IN THE ABOVE CIRCUMSTANCES, AS THE DECISION OF THE DIVISION BENCH OF THE TRIBUNAL IS BINDING UPON US, AND THERE FORE, FOLLOWING THE SAME, WE ARE OF THE OPINION THAT ` 248,007,447/- WHICH WAS ALLOWED AS SET OFF TO THE ASSESSEE IN COMPUTING THE BOOK P ROFIT OF THE I.T.A.NO.709/10 : - 24 - : ASSESSMENT YEAR 2004-05 WAS OF UNABSORBED DEPRECIAT ION ONLY AND AS THE ENTIRE UNABSORBED DEPRECIATION WAS ALLOWED AS D EDUCTION IN ASSESSMENT YEAR 2004-05, THE CARRIED FORWARD UNABSO RBED DEPRECIATION WAS NIL IN THE INSTANT CASE AND CONSE QUENTLY, THE DEDUCTION ALLOWABLE UNDER CLAUSE (III) OF EXPLANATI ON TO SECTION 115JB(2) IN THE YEAR UNDER CONSIDERATION COMES TO N IL. WE, THEREFORE, SET ASIDE THE ORDER OF THE CIT(A) AND RE STORE THAT OF THE ASSESSING OFFICER. THUS, THIS GROUND OF APPEAL OF THE REVENUE IS ALLOWED. 28. IN THE RESULT, THE APPEAL OF THE REVENUE IS PA RTLY ALLOWED. ORDER PRONOUNCED ON TUESDAY, THE 12 TH OF FEBRUARY, 2013, AT CHENNAI. SD/- SD/- (S. S. GODARA) JUDICIAL MEMBER (N.S.SAINI) ACCOUNTANT MEMBER DATED: 12 TH FEBRUARY, 2013 RD COPY TO: APPELLANT/RESPONDENT/CIT(A)/CIT/DR