JSW STEEL LTD, V. ASST CIT CIR 11(5),

ITA 75/BANG/2011

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 9027 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 11 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-01-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2004-2005
• Appeal Filed On: 25-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ALOK JOHRI
• Keywords: Depreciation; Retrospective amendment; Unabsorbed depreciation
• Section: 143(3); 115JB; 154; 2; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH A, MUMBAI BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER AND SHRI ASHWANI TANEJA, ACCOUNTANT MEMBER ITA NO.75/BANG/2011 ASSESSMENT YEAR: 2004-05 M/S JSW STEEL LIMITED, JINDAL MANSION, 5A, DR. G. DESHMUKH MARG, MUMBAI 400 026 PAN: AAACJ4323N VS. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 11(5), BANGALORE (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI KANCHAN KAUSHAL AND HIRALI DESAI , A.R. REVENUE BY : SHRI ALOK JOHRI, D.R. DATE OF HEARING : 21.10.2016 DATE OF PRONOUNCEMENT : 13. 01.2017 O R D E R PER: AMIT SHUKLA, JUDICIAL MEMBER: THE AFORESAID APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST IMPUGNED ORDER DATED 02.11.2010, PASSED BY L D. CIT (APPEALS)-1, BANGALORE IN RELATION TO THE PROCEEDINGS UNDER SECTION 154 READ WITH SECTION 143(3) READ WITH SECTION 2 50 FOR THE ASSESSMENT YEAR 2004-05. IN THE GROUNDS OF APPEAL, A SSESSEE HAS RAISED FOLLOWING GROUNDS: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) [CIT(A )'] HAS LEGALLY ERRED IN NOT DIRECTING THE LEARNED ASSESSIN G OFFICER ('AO') TO CONSIDER THE BOOK LOSS OF RS.438.63 CRORE S INSTEAD OF RS.172.36 CRORES, FOR THE PURPOSE OF CLAUSE (III ) IN THE EXPLANATION (1) TO SECTION 115JB(2) OF THE INCOME T AX ACT, ITA NO.75/BANG/2011 M/S. JSW STEEL LIMITED (FORMERLY KNOWN AS JINDAL VIJAYNAGAR STEEL LIMITED ) 2 1961 (THE ACT') WHILE COMPUTING BOOK PROFITS UNDER SECTION 115JB OF THE ACT. IT IS PRAYED THAT THE LEARNED AO BE DIRECTED TO CON SIDER THE BOOK LOSS OF RS.438.63 CRORES WHILE COMPUTING BOOK PROFITS UNDER SECTION 115JBOF THE ACT. 2. THE BRIEF FACTS AND BACKGROUND OF THE CASE QUA THE GROUND RAISED BY THE ASSESSEE ARE THAT, THE ASSESSEE COMPANY H AS FILED ITS ORIGINAL RETURN OF INCOME FOR THE ASSESSMENT YEAR 2 004-05 UNDER SECTION 139(1) ON 30.10.04, DECLARING NIL IN COME UNDER THE NORMAL PROVISIONS OF THE ACT. SUBSEQUENTLY, THE ASSE SSEE FILED A REVISED COMPUTATION OF INCOME ON 17 FEBRUARY 2005, DECLARING INCOME OF RS.27,67,98,970 (BEFORE BEING REDUCED TO N IL ON SET OFF OF BROUGHT FORWARD DEPRECIATION AND LOSSES) UNDER THE NORMAL PROVISIONS OF THE ACT AND BOOK PROFITS OF RS. 297,73, 75,188 UNDER THE PROVISIONS OF SECTION 115JB OF THE ACT. THE BOOK PR OFITS WAS INCREASED ON ACCOUNT OF RE-COMPUTATION OF THE FIGURE OF BROUGHT FORWARD LOSS UNDER CLAUSE (III) OF EXPLANATION 1 TO SECTION 115JB OF THE ACT FROM RS. 438,63,43,272/- TO RS. 172,35,65,2 25/-, THE DIFFERENCE BEING PRIMARILY DUE TO THE EFFECT OF DEFERR ED TAX ASSET ('DTA') IN EARLIER YEARS. THE ASSESSING OFFICER COM PLETED THE ASSESSMENT U/S 143(3), VIDE ORDER DATED DECEMBER 29, 2006 DETERMINING THE INCOME UNDER THE NORMAL PROVISIONS O F THE ACT AT RS.152,58,98,970/- (BEFORE BEING REDUCED TO NIL ON S ET OFF OF BROUGHT FORWARD DEPRECIATION AND LOSS) AND THE BOOK PROFIT AT RS.529,36,25,104/- UNDER THE PROVISIONS OF SECTION 11 5JB AS AGAINST THE REVISED BOOK PROFIT OF RS. 297,73,75,188/ -. AGAINST THE DISALLOWANCE MADE BY THE ASSESSING OFFICER, THE A SSESSEE FILED AN APPEAL BEFORE THE LD. CIT(A). IN THE SAID A PPEAL AN ADDITIONAL GROUND WAS RAISED BY THE ASSESSEE VIDE PETI TION DATED JANUARY 2, 2009 FOR CONSIDERATION OF BOOK LOSS OF RS. 438.63 CRORE INSTEAD OF RS.172.36 CRORE FOR THE PURPOSE OF CLAUSE (III) OF EXPLANATION (1) TO SECTION115JB(2) OF THE ACT. THIS GRO UND WAS ITA NO.75/BANG/2011 M/S. JSW STEEL LIMITED (FORMERLY KNOWN AS JINDAL VIJAYNAGAR STEEL LIMITED ) 3 TAKEN PURSUANT TO THE AMENDMENT BROUGHT THE BY FINANCE ACT, 2008, W.R.E.F. 1 ST APRIL, 2001 BY WHICH THE BOOK PROFIT WAS REQUIRED TO BE INCREASED BY THE AMOUNT OF DEFERRED TAX AND PROVISION THEREOF DEBITED TO THE P&L A/C AND DECREASED BY AN AMOUNT OF DEFERRED TAX CREDITED TO THE P&L A/C. A DIRE CTION WAS GIVEN BY THE THEN LD. CIT(A) TO THE ASSESSING OFFICER VIDE ORDER DATED 09-07-2009, TO VERIFY THE VERACITY OF THE CLAIM A ND ASCERTAIN THE CORRECT POSITION OF LOSS OR UNABSORBED D EPRECIATION BROUGHT FORWARD AND REWORK THE BOOK PROFIT AS DEFINED IN EXPLANATION 1 TO SECTION 115JB OF THE ACT, IF CONSIDERED NECESSARY. HOWEVER, IN THE ORDER GIVING EFFECT PASSED BY THE ASSESSING OFFICER HE DENIED THE BENEFIT TO THE ASSESSEE . HIS OBSERVATIONS IN THIS REGARD WERE AS UNDER - 'THE ASSESSEE'S PETITION FOR RECTIFICATION BASED ON THE AMENDMENT HAD BEEN REJECTED BY AN ORDER PASSED ON 31.12.2008. THE NET PROFIT OR LOSS TO BE RECOGNISED IN THE BOOKS OF ACCOUNTS IS THE FIGURE ARRIVED AT AFTER TAKING INTO ACCOUNT THE TOTAL TAX EXPENSE WHICH INCLUDES BOTH CURRENT TAX AND DEFERRED TAX AND THIS VIEW IS ALSO AS PER THE GENERAL ACCOUNTING PRACTICE AND THE SAME IS CONFIRMED BY THE FIGURES SHOWN IN THE P&L A/C AS 'LOSS BROUGHT FORWARD FROM EARLIER YEARS.' BASED ON THE ACCOUNTING STANDARD 5 AND ACCOUNTING STANDARD 22, THE ASSESSEE'S CLAIM OF TAKING RS. 438.63 CRORES INSTEAD OF RS. 172.36 CRORES FOR CALCULATION OF BOOK PROFIT U/S I I5JB(2) IS INCORRECT.' IN SHORT THE ASSESSING OFFICER OBSERVED THAT SUCH ISSUE HAD BEEN RAISED BY THE ASSESSEE THROUGH RECTIFICATION APPLICATIO N DATED JUNE 18, 2008 WHICH HAD BEEN DECIDED AGAINST THE ASSE SSEE VIDE ORDER DATED 31.12.2008. THEREFORE, INSTEAD OF RAISIN G THIS ISSUE BY WAY OF AN ADDITIONAL GROUND SEEKING FOR ISSUANCE OF A DIRECTION TO ASSESSING OFFICER FOR VERIFICATION OF CO RRECTNESS OF THE ITA NO.75/BANG/2011 M/S. JSW STEEL LIMITED (FORMERLY KNOWN AS JINDAL VIJAYNAGAR STEEL LIMITED ) 4 COMPUTATION, THE ASSESSEE SHOULD HAVE MOVED APPEAL SEP ARATELY AGAINST THE ORDER PASSED U/S. 154 OF I.T. ACT DATED 31- 12-2008. NEVERTHELESS ON MERITS HIS OBSERVATIONS WERE AS UNDER: THE APPELLANT'S INTERPRETATION OF THE ACCOUNTING STANDARDS (I.E. NET LOSS SHOULD BE ARRIVED AT BEFOR E DEDUCTING INCOME TAX EXPENSE OR ADDING INCOME TAX SAVINGS) FOR ARRIVING AT THE DEFINITION OF NET LOSS IS FLAWED. THE AS 5 PARA 5 STATES THAT 'ALL ITEMS OF INCOME AND EXPENSE RECOGNIZED IN A PERIOD SHOULD BE INCLUDED I N THE DETERMINATION OF NET PROFIT OR LOSS FOR THE PERIOD UNLESS AN AS REQUIRES OR PERMITS OTHERWISE'. FURTHER AS 22 PARA 9 STATES THAT 'TAX EXPENSE FOR THE PERIOD COMPRISING CURRENT TAX AND DEFERRED TAX SHOULD BE INCLUDED IN DETERMINATION OF THE NET PROF IT OR LOSS FOR THE PERIOD. THE NET PROFIT OR LOSS TO BE RECOGNIZED IN THE BO OKS OF ACCOUNT IS THE FIGURE ARRIVED AT AFTER TAKING INTO ACCOUNT THE TOTAL TAX EXPENSE WHICH INCLUDES BOTH CURRENT TAX AND DEFERRED TAX. THE AMOUNT OF LOSS BROUGHT FORWARD IS AS PER THE GENERAL ACCOUNTING PRACTICE AND THE SAME IS CONFIRM ED BY THE FIGURES SHOWN IN THE P&L A/C. AS 'LOSS BROUG HT FORWARD FROM EARLIER YEARS' THE ASSESSEE'S INTERPRETATION OF LOSS AS PER BO OKS OF ACCOUNT, BEING A NEGATIVE 'BOOK PROFIT', AND HENCE, TO ARRIVE AT 'AMOUNT OF LOSS BROUGHT FORWARD AS PER BOOKS OF ACCOUNTS, ALL ADJUSTMENTS AS PER SEC. 115JB IS TO BE DONE TO THE LOSS SHOWN IN THE P&L A/C, IS INCORRECT. THE ARGUMENT THAT THE 'BALANCE OF LOSS CARRIED TO BALANCE SHEET' AS SHOWN IN THE P&L A/C IS NOT THE CORRECT FIGURE TO BE ADOPTED FOR THE AMOUNT OF LOSS BROUGHT FORWARD AS PER BOOKS OF ACCOUNT IS AN INCOR RECT POSITION TAKEN BY THE ASSESSEE. 3. THE LD. CIT(A), AFTER CALLING FOR THE REMAND REPO RT FROM THE ITA NO.75/BANG/2011 M/S. JSW STEEL LIMITED (FORMERLY KNOWN AS JINDAL VIJAYNAGAR STEEL LIMITED ) 5 ASSESSING OFFICER AND CONSIDERING THE ASSESSEES SUB MISSION, DID NOT AGREE WITH THE CONTENTION OF THE ASSESSEE AND AFTER ANALYZING THE PROVISIONS OF SECTION 115JB IN HIS OWN WAY, OBSER VED AND AS UNDER:- ON A CAREFUL CONSIDERATION OF THE FACTS BROUGHT BE FORE ME, THE BASIS OF THE AO'S DECISION, AND THE ARGUMENTS B Y THE APPELLANT, I AM OF THE VIEW THAT THE APPELLANT SHOU LD NOT BE ALLOWED A DEDUCTION OF RS. 438.6 CRORES FROM THE BO OK PROFITS AS CLAIMED BY THE AR INSTEAD OF RS.172.6 CR ORES. THE AO HAS ACTED CORRECTLY UNDER CLAUSE (III) OF EX PLANATION 1 TO S. 115B OF THE ACT . THE FACTS AND REASONS ARE AS UNDER- I. A. THE APPELLANT IN ITS ORIGINAL ROI, FOR THE CU RRENT YEAR ADDED BACK THE DTL AND CLAIMED ADJUSTMENT OF BROUGHT FORWARD LOSSES OF RS. 438.63 CRORES UNDER CLAUSE (III) TO EXPLANATION 1 TO S. 115JB OF THE ACT. B. SUBSEQUENTLY, THE APPELLANT FILED REVISED COMPUTATION OF INCOME, WHEREIN IT CLAIMED DEDUCTION OF DTL IN LIEU OF SETTLED LAW INCLUDING THAT OF THE CALCUTTA HIGH COURT IN THE CASE OF BALRAMPUR CHINNI MILLS LTD. (SUPRA) AND CLAIMED ADJUSTMENT OF BROUGH T FORWARD LOSSES OF 172.36 CRORES UNDER CLAUSE (III) TO EXPLANATION 1 TO S. 115JB OF THE ACT. C. DUE TO THE AMENDMENT, THE AO ADDED BACK THE DTL TO APPELLANT'S BOOK PROFIT HOWEVER DID NOT ALLO W SET OFF OF LOSSES OF RS. 438.63 CRORES WHICH SUFFER ED DTA IN EARLIER YEARS UNDER CLAUSE (III) TO EXPLANATION 1 TO S. 115JB OF THE ACT. D. THE ACT IS SILENT AS TO WHETHER LOSSES OF EARLIE R YEARS WHICH SUFFERED DTA HAS TO BE SET OFF OR NOT? E. IT IS A FUNDAMENTAL RULE OF LAW OF TAXATION THAT LEGISLATIVE INTENTION IN BRINGING OUT AN AMENDMENT SHOULD BE DRAWN AS FAR AS PRACTICABLE FROM LITERAL INTERPRETATION OF THE LANGUAGE USED AND IT MUST NOT BE ENDEAVORED TO SUPPLY WORDS WHEN THE ACT IS SILENT EVEN IF SUCH SILENCE LEADS TO DOUBLE JEOPARD Y OR DOUBLE TAXATION. IT IS BEYOND THE POWERS OF EXECUTIVE TO VENTURE INTO SUCH ACTIVITY BECAUSE THA T ITA NO.75/BANG/2011 M/S. JSW STEEL LIMITED (FORMERLY KNOWN AS JINDAL VIJAYNAGAR STEEL LIMITED ) 6 WOULD LEAD TO OPENING A PANDORA'S BOX. THE BEST WAY TO GET THE REMEDY IS TO GO FOR THE JUDICIAL PROCEDURE WHICH WILL DECLARE SUCH PROVISIONS OF THE ACT UNCONSTITUTIONAL. F. IT IS BETTER TO QUOTE THE MEMORANDUM EXPLAINING THE RETROSPECTIVE INSERTION OF CLAUSE (H) AND (VIII ) OF EXPLANATION 1 TO S. 115 JB OF THE ACT. 'THE INTENTION BEHIND THESE ADD BACKS IS THAT THE ITEMS WHICH MAINLY APPEAR 'BELOW THE LINE' IN THE PROFIT AND LOSS ACCOUNT SHOULD BE ADDED BACK TO ARRIVE AT THE 'BOOK PROFIT' IF THEY APPEAR 'ABOVE T HE LINE' IN THE PROFIT AND LOSS ACCOUNT. SECTION 115JB HAS NOT SPECIFICALLY PROVIDED FOR ADD BACK OF SOME SUCH 'BELOW THE LINE' ITEMS LIKE DEFERRED TAX, DIVIDEND DISTRIBUTION TAX, ETC. AS THEY WERE THOUGH T TO BE INCLUDED IN THE TERM 'INCOME-TAX'. HOWEVER, THERE HAS BEEN SOME AMBIGUITY REGARDING ADD BACK OF THESE ITEMS, IF DEBITED TO PROFIT AND LOSS ACCOU NT. WITH A VIEW TO CLARIFYING THE INTENTION, IT IS PROP OSED TO INSERT A NEW CLAUSE AFTER CLAUSE (G) OF THE EXPLANATION 1 AS SO NUMBERED SO AS TO PROVIDE THAT THE BOOK PROFIT SHALL BE INCREASED BY THE AMOUNT OF DEFERRED TAX AND THE PROVISION THEREFORE, IF DEBITE D TO PROFIT AND LOSS ACCOUNT' THE ABOVE MAKES IT CRYSTAL CLEAR THAT THE AMENDMENT WAS BROUGHT TO NULLIFY THE DECISIONS IN THE CASE OF - ACIT VS. BAIRAMPUR CHERMI MILLS LTD., (2007) 297 ITR 15 (KOL-TRB) AND ALSO CONFIRMED BY THE CALCUTTA HIGH COURT. G. HERE, THE A.O. HAS FOLLOWED THE AMENDED PROVISIONS LITERALLY. HE HAS ALLOWED THE SET OFF AS PER CLAUSE (III) TO EXPLANATION 1 TO SECTION 115JB. THE A.O. HAS ALSO ACTED WITHIN THE JURISDICTION WHILE GIVING EFFECT TO THE DECISION OF THE CIT(A) BY QUANTIFYING THE RIGHT AMOUNT OF BROUGHT FORWARD LOSSES OF RS.172.36/- CRORES BEING LESS THAN THE UNABSORBED DEPRECIATION OF RS.488.23 CRORES FOR THE PURPOSE OF CLAUSE (III) TO EXPLANATION 1 TO SECTION 115JB OF I.T. ACT AFTER VERIFICATION. HE HAS ONLY COMMENTED ON THE MERITS ON THE ISSUE OF RECTIFICATI ON APPLICATION FILED BY THE APPELLANT WHICH HE IS ITA NO.75/BANG/2011 M/S. JSW STEEL LIMITED (FORMERLY KNOWN AS JINDAL VIJAYNAGAR STEEL LIMITED ) 7 ENTITLED TO DO BECAUSE HE HAS TO GIVE REASONS FOR REJECTION OF THE RECTIFICATION APPLICATION AND THIS IS NOT ADVERSE TO THE FINDINGS OF THE CIT(A). THE LEARNED CIT (A) HAS ALLOWED THE SET OFF. SHE HAS DIRECTED ONLY TO QUANTIFY THE AMOUNT OF LOSS FOR TH E PURPOSE OF COMPUTATION OF BOOK PROFIT U/S.115JB OF THE I.T. ACT. AFTER HEARING THE ASSESSEE, THE A.O. HAS QUANTIFIED THE AMOUNT CORRECTLY. HE HAS ALSO FOUND THAT THE AMOUNT QUANTIFIED EARLIER WHILE REJECTING THE PETITION U/S. 154 OF I.T. ACT WAS CORRECT AMOUNT. T HE LEARNED CIT (A) HAS ALSO NOT DIRECTED TO MODIFY THE SAME. SHE HAS ONLY DIRECTED TO VERIFY THE CORRECTNE SS OF QUANTIFICATION IN THE LIGHT OF ADDITIONAL GROUND S OF APPEAL WHICH THE AO HAS CARRIED OUT IN LETTER AS WE LL AS SPIRIT. BESIDES, THE ISSUE RAISED BY THE A.R. A S TO WHETHER ONE WOULD GO FOR LITERAL INTERPRETATION OR PURPOSIVE INTERPRETATION OR IN THIS CASE, THE ISSUE WHETHER PURPOSE INTERPRETATION IS REQUIRED OR NOT A RE DEBATABLE ISSUES AND THEREFORE NOT WITHIN THE REALM OF PROVISIONS OF SECTION 154 OF THE I.T. ACT AND THEREFORE THE A.O. HAS RIGHTLY REFRAINED FROM COMMENTING ON SUCH CONTENTIOUS ISSUE. IN THIS CASE I HOLD PURPOSIVE INTERPRETATION IS NOT REQUIRED AT AL L BECAUSE THE PROVISIONS OF THE ACT ARE VERY CLEAR AN D UNAMBIGUOUS. IT SAYS IN CLEAR TERMS THE LESSER OF T HE TWO VIZ., BROUGHT FORWARD LOSS AND UNABSORBED DEPRECIATION AS PER THE BOOKS OF ACCOUNT HAS TO BE REDUCED FROM THE NET PROFIT AND THAT IS WHAT HAS BEEN DONE BY THE A. O. EXACTLY. H. THE ARGUMENT OF A.R. THAT LITERAL AND STRICT INTERPRETATION IS NOT DESIRABLE HERE BECAUSE SUCH WOULD RESULT IN DOUBLE JEOPARDY AND DOUBLE TAXATION IS NOT IN MY REALM TO DECIDE BECAUSE INDIRECTLY IT IS BEING PLEADED THAT THE AMENDMENT IS UNCONSTITUTIONAL. THIS IS NOT THE RIGHT FORUM TO RA ISE OR DECIDE SUCH ISSUE. 4. BEFORE US, THE LD. COUNSEL SUBMITTED THAT ASSESSEE H AS DEBITED DEFERRED TAX LIABILITY (DTL) TO THE PROFIT & LOSS ACCOUNT WHICH WAS REVERSAL OF DEFERRED TAX ASSET (DTA) CRE ATED FOR THE ASSESSMENT YEAR 2002-03 AND 2003-04 ON ACCOUNT OF TIMI NG DIFFERENCES. WHILE CALCULATING THE BOOK PROFITS FOR TH E PURPOSE OF SECTION 115JB THE ASSESSEE HAS CLAIMED DEDUCTION OF D TL BASED ITA NO.75/BANG/2011 M/S. JSW STEEL LIMITED (FORMERLY KNOWN AS JINDAL VIJAYNAGAR STEEL LIMITED ) 8 ON THEN LEGAL POSITION AS ENUNCIATED BY KOLKATA TRIBUN AL IN THE CASE OF BALRAMPUR CHINNI MILLS LTD. WHICH HAS ALSO B EEN AFFIRMED BY THE HONBLE CALCUTTA HIGH COURT, REPORTED IN 316 I TR 364. AS PER THE REVISED COMPUTATION THE ASSESSEE ALSO REDUCED TH E LOSS OF RS.172.36 CRORES IN TERMS OF CLAUSE (III) TO EXPLANATION-1 OF SECTION 115JB. THE LOSS WAS REDUCED TO NET OF DTA ON TH E PREMISE THAT DTL WOULD BE ALLOWED AS DEDUCTION WHILE COMPUTING THE BOOK PROFIT FOR THE PURPOSE OF MAT. POST THESE EVENTS THERE WAS A RETROSPECTIVE AMENDMENT TO SECTION 115J B(2) VIDE FINANCE ACT, 2008, WHEREBY THE PROVISION OF DEFE RRED TAX WAS REQUIRED TO BE ADDED BACK/REDUCED WHILE COMPUTING THE BOOK PROFIT UNDER MAT WHICH WAS BROUGHT BY WAY OF CLARIFI CATION. THIS WAS BASICALLY DONE TO REVERSE THE POSITION TAKEN BY THE HONBLE CALCUTTA HIGH COURT (SUPRA). THE LD. COUNSEL SUBMITTED THAT SINCE ASSESSEE HAD ALREADY CREDITED PROFIT & LOSS AC COUNT BY CREDITING DTA TO THE PROFIT & LOSS ACCOUNT FOR ASSESSME NT YEARS 2002-03 & 2003-04, THEREFORE, ASSESSEE NEEDS RELIEF BY REDUCING THE DEFERRED TAX PORTION FROM THE LOSS CARRY FORWARD FR OM THE EARLIER YEARS WHICH IS REQUIRED TO BE REDUCED FOR THE PURPOSE OF EXPLANATION- 1 (III) TO SECTION 115JB OF THE ACT WHILE COMPUTING THE INCOME UNDER MAT FOR THE YEAR UNDER CONSIDERATION. HE SUBMITTED THAT IF THE ASSESSEES CONTENTION IS NOT ACCEPTED THEN IT WILL LEAD TO DOUBLE JEOPARDY AS THE ASSESSEE IS REQU IRED TO ADD BACK THE PROVISION MADE FOR DTL IN THE CURRENT YEAR O N ACCOUNT OF THE AMENDMENT AND FOR SETTING OFF OF LOSSES, IT WILL HAVE TO REDUCE AND LOWER THE AMOUNT OF LOSS WITHOUT MAKING ANY ADJUSTMENT OF DTA CREDITED IN THE EARLIER YEARS. TO D EMONSTRATE THE DOUBLE JEOPARDY SUFFERED BY THE ASSESSEE, THE LD. COUNSEL FILED A CHART TO SHOW AS TO HOW IT HAS LEAD TO DOUBLE TA XATION. IN SUPPORT OF THIS CONTENTION, THE LD. COUNSEL PLACED RELI ANCE ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. JH ITA NO.75/BANG/2011 M/S. JSW STEEL LIMITED (FORMERLY KNOWN AS JINDAL VIJAYNAGAR STEEL LIMITED ) 9 GOTLA 156 ITR 323. HE FURTHER SUBMITTED THAT THE WORDS U SED IN EXPLANATION 1 (III) TO SECTION 115JB OF THE ACT 'THE AMOUNT OF LOSS BROUGHT FORWARD' SHOULD NOT BE INTERPRETED IN A MANNER THAT IT DEFEATS THE INTENTION OF THE LEGISLATURE AND LEADS TO AB SURDITY AND DOUBLE JEOPARDY. THE CORRECT INTERPRETATION AFTER THE AME NDMENT IS THAT THE LOSS REQUIRED TO BE SET OFF UNDER CLAUSE ( III) SHOULD BE AFTER ADJUSTMENT OF DTA TILL ITS REVERSAL. ONCE THE DTA CREDITED PRIOR TO THE AMENDMENT IS REVERSED SUBSEQUENTLY BY DEB ITING DTL (IN THE PRESENT CASE TO THE TUNE OF RS. 372.57 CRORES), THEN THE STRICT INTERPRETATION SHOULD BE FOLLOWED. BUT, UNLESS A N ADJUSTMENT IS ALLOWED TO THE LOSS IN RESPECT OF DTA CREA TED (BEFORE AMENDMENT) THE ABSURDITY WILL REMAIN. HE FURTH ER SUBMITTED THAT THE DTA CREDITED TO THE P&L A/C IS NOT AN INCOME PER SE. IT IS ACCOUNTED ONLY ON ACCOUNT OF A TIMING DIFFERENCE BY CREDITING TO P&L A/C AND CREATING AN 'AS SET'. THE ASSET WHICH IS CREATED IS NOT ANY AMOUNT WHICH IS REC EIVABLE IN THE FUTURE. THE SAME GETS REVERSED IN THE YEARS WHEN THE COMPANY STARTS MAKING PROFITS. FURTHER, EVEN UNDER THE NORMAL COMPUTATION THE AO HAS NOT RECOGNISED THE DTA AS 'INCOME ' AND ONLY THE GROSS LOSS AFTER MAKING ADJUSTMENTS UNDER THE A CT (AS PER NORMAL PROVISIONS) HAS BEEN CARRIED FORWARD TO TH E SUBSEQUENT YEARS. IF DTA IS NOT INCOME, IT CANNOT BE R EDUCED FROM THE LOSS WHICH IS REQUIRED TO BE CARRIED FORWARD FOR SETTING IT OFF FOR THE PURPOSES OF MAT. THUS, A CONSISTENCY SHOU LD BE MAINTAINED BOTH UNDER THE NORMAL PROVISION OF THE ACT A ND ALSO UNDER MAT. ACCORDINGLY, BY NOT GRANTING ADJUSTMENT OF D TA IN THE CARRY FORWARD LOSS, THE ASSESSEE WILL BE SUBJECTED TO DOUBLE JEOPARDY, ONCE AT THE TIME OF CREDITING DTL TO BOOK PROF ITS AND IN ANOTHER INSTANCE WHEN SETTING OF REDUCED LOSS I.E. NET OF DTA AS PER CLAUSE (III) TO EXPLANATION 1 OF SECTION 115JB OF THE ACT. ITA NO.75/BANG/2011 M/S. JSW STEEL LIMITED (FORMERLY KNOWN AS JINDAL VIJAYNAGAR STEEL LIMITED ) 10 5. ON THE OTHER HAND, THE LD. D.R. STRONGLY RELIED UPO N THE ORDER OF THE LD. CIT (A). 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED TH E RELEVANT FINDING GIVEN IN THE IMPUGNED ORDER. THE AS SESSEE WHILE COMPUTING THE BOOK PROFIT IN ITS ORIGINAL RETURN OF INC OME HAD REDUCED THE AMOUNT OF BROUGHT FORWARD LOSS OF RS.438, 63,43,272 BEING LOWER OF THE BROUGHT FORWARD LOSS OR DEPRECIATI ON AS PROVIDED IN CLAUSE (III) OF EXPLANATION-1 TO SECTION 115JB. LATER ON THE ASSESSEE FILED REVISED COMPUTATION OF INCOME DECLA RING INCOME OF RS.27,67,98,970/- UNDER THE NORMAL PROVISI ONS OF THE ACT AND THE BOOK PROFIT OF RS.297,73,75,188/- UNDER THE PROVISION SECTION 115JB. THUS, THE BOOK PROFIT WAS INC REASED ON ACCOUNT OF RE-COMPUTATION OF FIGURE OF BROUGHT FORWAR D LOSS FROM RS. 438.63 CRORES TO RS. 172.35 CRORES. THIS DIFFERE NCE WAS PRIMARILY DUE TO EFFECT OF DEFERRED TAX ASSET (DTA) IN THE EARLIER YEARS WHICH WAS GIVEN WHILE COMPUTING THE LOSS ON THE BASIS OF DEFERRED TAX LIABILITY (DTL) WHICH WAS TO BE ALLOWE D AS DEDUCTION IN THE CURRENT YEAR WHILE COMPUTING THE BOOK PROFIT UN DER SECTION 115JB WHICH WAS IN LINE THAT THE DECISION OF ITAT KOLK ATA BENCH IN BALRAMPUR CHINNI MILLS LTD. (SUPRA) AFFIRMED BY HONBLE CALCUTTA HIGH COURT. THE ASSESSING OFFICER TOOK THE FIGU RE OF BROUGHT FORWARD BOOK LOSS OF RS.172.36 CRORES WHILE COMPUTING THE BOOK PROFIT UNDER SECTION 115JB. THIS WAS FOR THE R EASON THAT, SINCE THE ASSESSEE WAS AVAILING THE BENEFIT OF DED UCTION OF DTL FROM THE BOOK PROFIT IN THE CURRENT YEAR FOLLOWIN G THE DECISION OF BALRAMPUR CHINNI MILLS LTD. (SUPRA), THER EFORE, THE ACTION OF THE ASSESSING OFFICER FOR TAKING THE BOOK LO SS OF RS.172.36 CRORES INSTEAD OF RS.438.63 CRORES WAS NOT CHALLENGED. WHEN THE RETROSPECTIVE AMENDMENT CAME WITH FINANCE ACT, 2 008 WITH RETROSPECTIVE EFFECT FROM 01.04.2001 BY INSERTION OF CLAUSE ITA NO.75/BANG/2011 M/S. JSW STEEL LIMITED (FORMERLY KNOWN AS JINDAL VIJAYNAGAR STEEL LIMITED ) 11 (H), WHEREBY THE BOOK PROFIT WAS REQUIRED TO BE INCREASED B Y AN AMOUNT OF DEFERRED TAX LIABILITY AND PROVISION THERE OF DEBITED TO THE PROFIT & LOSS ACCOUNT AND DECREASED BY AN AMOUNT OF DEFERRED TAX ASSET CREDITED TO THE PROFIT & LOSS ACCO UNT; ASSESSEE WHO HAD NOT DECREASED THE AMOUNT OF DTA BUT AT THE SAME TIME BY VIRTUE OF RETROSPECTIVE AMENDMENT HAD TO REDUCE THE DTL SUFFERED THE BENEFIT OF CARRY FORWARD LOSS. THE EFFEC T OF THE WORKING OF CARRY FORWARD LOSS CAN BE TABULATED IN THE FOLLOWING MANNER:- PARTICULARS AFTER AMENDMENT BEFORE AMENDMENT AMOUNTS IN CRORES AMOUNTS IN CRORES LOSS AFTER TAXATION 660.59 660.59 ADD: DEFERRED TAXES PROVISION 436.19 ----- LOSS BEFORE TAX 1096.78 660.58 UNABSORBED DEPRECIATION 658.15 488.22 UNABSORBED BUSINESS LOSS 438.63 172.36 AMOUNT ELIGIBLE FOR SET-OFF U/S.115JB 438.63 172.36 SINCE THE ASSESSEE HAS ALREADY CREDITED THE PROFIT & L OSS ACCOUNT BY CREDITING THE DEFERRED TAX ASSET TO THE PROF IT & LOSS ACCOUNT FOR THE ASSESSMENT YEAR 2002-03 & 2003-04, THE REFORE, DEFERRED TAX PORTION NEEDS TO BE REDUCED FROM THE LOSS CARRY FORWARD FROM THE EARLIER YEARS WHICH IS REQUIRED TO B E REDUCED FOR THE PURPOSE OF EXPLANATION 1 (III) TO SECTION 115JB WHILE COMPUTING THE INCOME UNDER MAT FOR THE YEAR UNDER CONSIDERATION. NOW IN WAKE OF THE AMENDMENT THE ASSESSE E IS REQUIRED TO ADD BACK THE PROVISION FOR DEFERRED TAX AB ILITY IN THE CURRENT YEAR AND FOR SETTING OFF OF LOSSES, IF IT IS NO T ALLOWED TO ITA NO.75/BANG/2011 M/S. JSW STEEL LIMITED (FORMERLY KNOWN AS JINDAL VIJAYNAGAR STEEL LIMITED ) 12 REDUCE THE LOWER OF THE AMOUNT OF LOSS WITHOUT TAKING AN Y ADJUSTMENT OF DEFERRED TAX LIABILITY CREDITED IN THE EA RLIER YEARS, IT WILL DEFINITELY AMOUNT TO DOUBLE JEOPARDY TO THE ASS ESSEE. THIS CAN BE ILLUSTRATED BY WAY OF FOLLOWING HYPOTHETICAL EXA MPLE: PART ICULARS YEAR 1 YEAR 2 YEAR 3 OPENING BALANCE OF LOSS _ - (200) - (250) LOSS/PROFIT OF THE CURRENT YEAR - (300) - (100) 1000 TOTAL LOSS /PROFIT _ - (300) 750 DEFERRED TAX ASSET OF THE CURRENT YEAR 100 50 _ DE FERRED TAX LIABILITY OF CURRENT YEAR _ _ - (150) LOSS CARRIED FORWARD / BOOK LOSS - (200) - (250) _ PROFIT CARRIED FORWARD _ _ 600 MAT COMPUTATION PARTICULARS AS PER AO AS PER ASS ESSEE NET PROFIT AS PER P&L A/C 850 850 * *[PROFIT OF C/Y- 1000 LESS: DTL- 150 NET PROFIT- 850] ADD: DEFERRED TAX LIABILITY 150 150 TOTAL 1000 1000 LESS: LOSS TO BE SET OFF AS PER CLAUSE (III) OF EXPLANATION 1 OF SECTION 115JB 250 400 BOOK PROFIT 750 600 ITA NO.75/BANG/2011 M/S. JSW STEEL LIMITED (FORMERLY KNOWN AS JINDAL VIJAYNAGAR STEEL LIMITED ) 13 7. FROM THE ABOVE ILLUSTRATION IT CAN BE SEEN THAT THE DT A HAS ALREADY BEEN REDUCED FROM THE LOSS OF THE CURRENT YEAR IN THE YEAR ONE AND YEAR TWO; AND IN THE YEAR THREE WHEN THERE IS A PROFIT IN THE CURRENT YEAR THEN WORKING OF THE LOSS WHI CH STANDS REDUCED BY THE DTA EARLIER, GETS AFFECTED AND ULTIMATE LY IT EFFECTS THE WORKING OF THE BOOK PROFIT IN THE THIRD YEAR. THEREFORE, THE CORRECT WAY OF UNDERSTANDING THE EFFECT OF BOOK PROFIT AFTER THE AMENDMENT IN THE CASE OF THE ASSESSEE IS THAT THE LOSS WHICH IS REQUIRED TO BE SET OFF UNDER CLAUSE (III ) SHOULD BE AFTER THE ADJUSTMENT OF DTA TILL ITS REVERSAL. ONCE THE DTA CREDITED PRIOR TO THE AMENDMENT IS REVERSED SUBSEQUENTL Y BY DEBITING DTL, THEN ONLY THE CORRECT BOOK PROFIT CAN BE ARRIVED AT. OTHERWISE ALSO THE DTA CREDITED TO THE PROFIT & LO SS ACCOUNT IS NOT AN INCOME PER SE IT IS ONLY ACCOUNTED ON ACCOU NT OF TIMING DIFFERENCE BY CREDITING TO PROFIT & LOSS ACCOUN T AND CREATING AN ASSET. THE ASSET WHICH IS CREDITED IS NOT A N AMOUNT WHICH IS RECEIVABLE IN THE FUTURE BECAUSE THE SAME GE TS REVERSED IN THE YEAR WHEN COMPANY STARTS MAKING PROFITS. EVEN TH E ASSESSING OFFICER HAS NOT RECOGNISED THE DTA AS INCOM E BUT ONLY AS A GROSS LOSS AFTER MAKING THE ADJUSTMENT UNDER THE ACT WHICH HAS BEEN CARRIED FORWARD TO THE SUBSEQUENT YEARS . IF THE DTA IS NOT RECKONED AS INCOME, THEN IT CANNOT BE REDUCE D AS LOSS WHICH IS REQUIRED TO BE CARRIED FORWARD FOR SETTI NG IT UP FOR THE PURPOSE OF MAT. THUS, WE DIRECT THE ASSESSING OFFI CER TO WORK OUT THE CORRECT LOSS WHICH IS ELIGIBLE FOR SETTING OFF UNDER CLAUSE III OF EXPLANATION 1 FOR THE PURPOSE OF COMPUTING MAT PROFIT UNDER SECTION 115JB IN THE ASSESSMENT YEARS 200 2-03 AND 2003-04 AND THEN COMPUTE THE BOOK PROFIT IN THE CU RRENT YEAR BY SETTING OFF THE CORRECT LOSS AS PER THE PROVISIO NS OF THE ITA NO.75/BANG/2011 M/S. JSW STEEL LIMITED (FORMERLY KNOWN AS JINDAL VIJAYNAGAR STEEL LIMITED ) 14 ACT. HE SHOULD MAKE THE SUITABLE ADJUSTMENT OF DEFERRED TAX ASSET CREDITED IN THE EARLIER YEAR TO THE PROFIT AND LOS S (HERE IT IS LOSS) WHICH IS REQUIRED TO SET BE OFF IN ACCORDANCE W ITH CLAUSE (III) OF EXPLANATION-1 TO SECTION 115JB AND TO ENSURE THAT NO DOUBLE JEOPARDY IS CAUSED TO THE ASSESSEE. HE SHOULD RECALCULATE THE AMOUNT OF BROUGHT FORWARD LOSSES AND CO RRECTLY DETERMINE THE BOOK PROFIT IN ACCORDANCE WITH THE PROVI SIONS OF THE LAW. 8. WITH THIS DIRECTION, THE APPEAL OF THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 13.01.201 7. SD/- SD/- (ASHWANI TANEJA) (AMIT SHUKLA) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 13.01.2017. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// BY ORD ER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.