Kirloskar Ferrous Industries Ltd., Pune V. Dy. CIT, Circle-9, Pune

ITA 910/PUN/2013

• Counselvise Citation: 91024514 RSA 2013
• Duration Of Justice: 1 year(s) 3 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-07-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 23-07-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 25-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B C MALAKAR
• Keywords: Depreciation; Opportunity of being heard; Unabsorbed depreciation; Revenue expenditure
• Section: 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO.910/PN/2013 (ASSESSMENT YEAR 2007-08) KIRLOSKAR FERROUS INDUSTRIES LTD., LAXMANRAO KIRLOSKAR ROAD, KHADKI, PUNE 411003 PAN NO.AAACK7297E .. APPELLANT VS. DY.CIT, CIRCLE-9, AKURDI, PUNE .. RESPONDENT ITA NO.1287/PN/2013 (ASSESSMENT YEAR 2007-08) DY.CIT, CIRCLE-9, AKURDI, PUNE .. APPELLANT VS. KIRLOSKAR FERROUS INDUSTRIES LTD., LAXMANRAO KIRLOSKAR ROAD, KHADKI, PUNE 411003 PAN NO.AAACK7297E .. RESPONDENT ASSESSEE BY : SHRI C.H. NANIWADEKAR REVENUE BY : SHRI B.C. MALAKAR DATE OF HEARING : 24-07-2014 DATE OF PRONOUNCEMENT : 30-07-2014 ORDER PER R.K. PANDA, AM : THESE ARE CROSS APPEALS, THE FIRST ONE IS FILED BY THE ASSESSEE AND THE SECOND ONE FILED BY THE REVENUE AND ARE DIRECTED AG AINST THE ORDER DATED 20-03-2013 OF THE CIT(A)-V, PUNE RELATING TO ASSESS MENT YEAR 2007-08. FOR THE SAKE OF CONVENIENCE, THESE APPEALS WERE HEA RD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER. 2 ITA NO.910/PN/2013 (BY ASSESSEE) : 2. THE ONLY GROUND RAISED BY THE ASSESSEE READS AS UNDER : THE LEARNED CIT(A) ERRED ON FACTS AND IN LAW IN UP HOLDING DISALLOWANCE OF PRIOR PERIOD EXPENSES OF RS. 47,85,487 ON THE GROUND T HAT THERE IS NO LOGIC IN CLAIMING PERIOD EXPENSES AS THE EXPENSES PERTAINING T O EARLIER YEARS AND IF THE EXPENSES PERTAINING TO THE EARLIER YEARS ARE AL LOWED, IT WOULD GIVE A DISTORTED PICTURE OF THE INCOME FOR THE YEAR UNDER C ONSIDERATION. HE FAILED TO APPRECIATE THAT THE BILLS FOR THESE EXPENSES HAVE BE EN RECEIVED DURING THE YEAR AND THE LIABILITY ACCRUED DURING THE YEAR UNDER THE ACCOUNTING SYSTEM FOLLOWED BY THE COMPANY. 2.1 FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSES SING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOTED THAT THE ASS ESSEE HAS CLAIMED PRIOR PERIOD EXPENDITURE AMOUNTING TO RS.47,85,487/-. AC CORDING TO THE ASSESSING OFFICER, THERE WAS NO LOGIC IN CLAIMING P RIOR PERIOD EXPENSES PERTAINING TO THE CURRENT YEAR. HE NOTED THAT THE ASSESSEE COULD NOT JUSTIFY AS TO WHY THE EXPENSES PERTAINING TO EARLIER YEAR N EEDS TO BE ALLOWED OUT OF CURRENT YEARS INCOME. ACCORDING TO THE ASSESSI NG OFFICER, EVERY YEAR IS A SEPARATE YEAR AND IF THE EXPENSES PERTAINING T O THE EARLIER YEARS ARE ALLOWED, IT WOULD GIVE A DISTORTED PICTURE OF THE I NCOME FOR THE YEAR UNDER CONSIDERATION. HE ACCORDINGLY DISALLOWED THE PRIOR PERIOD EXPENDITURE OF RS.47,85,487/- CLAIMED BY THE ASSESSEE. 3. IN APPEAL THE LD.CIT(A) DISMISSED THE GROUND RAI SED BY THE ASSESSEE BY OBSERVING AS UNDER : 7. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE AS WELL AS REPLY OF THE APPELLANT. THE APPELLANT CLAIMS THAT THE ISSUE IS COVERED IN ITS FAVOUR BY THE DECISION OF HONBLE TRIBUNALS ORDER IN A.Y. 1 995-96 IN ITS OWN CASE. AFTER GOING THROUGH THE ABOVE ORDER, IT IS SEEN THAT THE HONBLE TRIBUNAL FOLLOWED THE DECISION OF HONBLE BOMBAY HIGH COURT I N APPELLANTS OWN CASE FOR EARLIER YEARS. THE RELEVANT PORTION OF THE ORDER IS AS UNDER : AS REGARDS THE QUESTION NO. II & III ARE CONCERNED, T HE TRIBUNAL RELYING UPON ITS DECISION IN THE CASE OF KIRLOSKAR PNEUMATIC C O. IN ITA NO. 6/PN/07 FOR THE A.Y. 2003-04 HELD THAT EVEN IF THE EXPENDITURE IS INCURRED IN THE YEAR BUT THE DEMAND IS RAISED AND ACCEPTED IN THE SUBSEQUENT YEARS, THEN THE EXPENDITURE WOULD BE ALLOWABLE IN THE SUBSEQ UENT YEAR. WE SEE NO INFIRMITY IN THE ABOVE ORDER PASSED BY ITAT. ACCOR DINGLY, APPEAL IS DISMISSED.' 3 8. FOLLOWING THE ABOVE PROPOSITION, THE LEARNED COUN SEL OF THE APPELLANT WAS ASKED TO SUBSTANTIATE THAT THE EXPENDITUR E THOUGH RELATES TO EARLIER YEARS ACCRUED DURING THE PREVIOUS YEAR RELEVA NT TO A.Y. 2007-08 OUT OF EXPENDITURE OF ` 50,22,237/- (DISALLOWANCE WAS MADE AT ` 47,85,487/- CONSIDERING THE RECEIPT OF ` 2,36,750/- OF PRIOR PERIOD), THE APPELLANT TRIED TO JUSTIFY ONLY TWO ITEMS OF EXPENDITURE REPRESENTING SUBSTANTIAL SUM BEING APPLICATION FEE OF ` 11,57,034/- AND FREIGHT INWARD IRON ORE LUMP ` 18,58,229/-. EXCEPT THESE TWO ITEMS, THE APPELLANT DI D NOT EVEN BOTHERED TO ATTEMPT TO EXPLAIN THE FACTS REGARDING PRIOR PERI OD EXPENSES. THEREFORE, IT IS CLEAR THAT THE APPELLANT HAS NOTHING TO EXPLAI N REGARDING THOSE ITEMS OF EXPENDITURE. CORNING TO THE ISSUE OF APPLICATION FEE AND FREIGHT INWARD IRON LUMP THE SAME ARE DISMISSED AS UNDER : APPLICATION FEE - ` `` ` 11,57,034/- AFTER GOING THROUGH THE DETAILS IT IS SEEN THAT THE AB OVE EXPENDITURE HAS BEEN INCURRED ON INITIAL EXPENSES FOR VARIOUS PROJECT S SUCH AS COKE OVEN, STEEL PLANT PROJECT AND IRON ORE MINING ETC. THE SAM E WERE SCRAPED DUE TO COST ESCALATION AS WELL AS VARIOUS REASONS AND THE SAME WAS DEBITED TO THE PROFIT & LOSS A/C FOR THE F.Y. 2006-07 RELEVANT TO A. Y. 2007-08. THE NATURE OF EXPENDITURE IS PRE-OPERATIVE EXPENSES AND CAPITAL A ND THEREFORE THE SAME CANNOT BE ALLOWED AS REVENUE EXPENDITURE BESIDES- IT BEING PRIOR PERIOD EXPENDITURE. THEREFORE, ACTION OF THE ASSESSING OFFICER IN THIS REGARD DOES NOT REQUIRE INTERFERENCE. FREIGHT INWARD IRON ORE LUMPS - ` `` ` 18,58,229/- DURING THE COURSE OF APPELLATE PROCEEDINGS, THE LEARN ED COUNSEL OF THE APPELLANT WAS ASKED TO SUBSTANTIATE WITH PROOF THAT THE BILLS IN RESPECT OF THE ABOVE EXPENSES WERE RECEIVED DURING THE PREVIOUS YEAR RELEVANT TO A.Y. 2007-08. THE APPELLANT FILED COPIES OF CERTAI N BILLS BUT FAILED TO PROVE THAT THE SAME WERE RECEIVED BY THE APPELLANT COMPANY BY SHOWING INWARD STAMP EVIDENCING COMPANY'S NAME AS WELL AS DATE. FURTH ER, THERE WERE DISCREPANCIES IN THE BILLS OF SREE SRINIVAS MINERALS IN THE SENSE THAT TWO BILLS FOR THE SAME BILL NO. 31 WERE ISSUED ON 04.03.200 6. ONE BILL OF ` 1,46,760/- WAS ISSUED VIDE BILL NO.31 DATED 04.03.200 6 FOR TRANSPORTATION. ON THIS BILL NO DATE OF RECEIPT AND STAMP OF COMPANY WAS SHOWN. FURTHER, THE APPELLANT FILED COPY OF SAME B ILL NO. 31 DATED 04.03.2006 BEING CRUSHING CHARGES OF IRON ORE LUMPS FO R ` 1,46,760/-. ON THIS BILL DATE OF RECEIPT IS STAMPED AT 21.06.2006 BUT STAMP OF THE COMPANY IS MISSING. ON BEING QUESTIONED WHY TWO INVOICES WITH SAM E SERIAL NO. 31 FOR THE SAME AMOUNT FOR TWO DIFFERENT WORKS ARE SUBMIT TED, THE APPELLANT FILED CLARIFICATORY LETTER FROM SREE SRINIVASA M INERALS DATED 16.03.2013 THAT TO KEEP THE TRACK OF THE WORK DONE, BILLS FOR SA ME SERIAL NO. WERE ISSUED. THIS EXPLANATION CANNOT BE ACCEPTED FOR THE SI MPLE REASON THAT TWO INVOICES CANNOT HAVE SAME SERIAL NUMBER AND SHOWS TH AT THE WHOLE TRANSACTION LACKED TRANSPARENCY. COPY OF BOTH THE BI LLS ARE MARKED AS ANEXURE-1 & ANNEXURE 2 TO HAVE BETTER UNDERSTANDING OF STATEMENT OF AFFAIRS OF THE APPELLANT COMPANY IN RESPECT OF THIS TR ANSACTION. FURTHER, ON BEING ASKED TO PROVE THAT THE BILLS WERE RECEIVED BY THE APPELLANT COMPANY IN F.Y. 2006-07 WITH PROPER DOCUMENTARY EVIDENCE, S HRI.C.H. NANIWADEKAR, LEARNED COUNSEL OF THE APPELLANT VIDE ORDER SHEET NOT ING DATED 18.03.2013 EXPRESSED HIS INABILITY TO DO SO. THIS BEING SO, BESIDES TH E DISCREPANCY IN THE BILLING POINTED OUT ABOVE, IT IS ALSO NOT PROVED THAT THE BILLS WERE RECEIVED DURING THE PREVIOUS YEAR. THEREFORE, THE CLAIM OF THE APPELLANT CANNOT BE ALLOWED. REGARDING OTHER ITEMS OF EXPENDI TURE IT HAS BEEN ALREADY STATED IN THE ABOVE PARAS THAT NO DETAILS WHAT SOEVER COULD BE FURNISHED BY THE APPELLANT TO PROVE THAT THE EXPENDI TURE ACCRUED DURING THE PREVIOUS YEAR RELEVANT TO A.Y. 2007-08. ACCOR DINGLY, ACTION OF THE ASSESSING OFFICER IN DISALLOWING PRIOR PERIOD EXPENSES OF ` 47,85,487/- IS UPHELD AND THE GROUND IS DISMISSED. 4 3.1 AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASS ESSEE IS IN APPEAL BEFORE US. 4. THE LD. COUNSEL FOR THE ASSESSEE REFERRING TO TH E ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2001-02 SU BMITTED THAT THE TRIBUNAL VIDE ITA NO.316/PN/2007 ORDER DATED 22-06- 2009 FOR A.Y. 2001-02 HAD DELETED THE DISALLOWANCE MADE BY THE AS SESSING OFFICER AND CONFIRMED BY THE CIT(A) ON ACCOUNT OF PRIOR PERIOD EXPENSES OF RS.40,47,074/-. REFERRING TO THE DECISION OF THE H ONBLE BOMBAY HIGH COURT IN ASSESSEES OWN CASE VIDE ITA NO.622/2010 O RDER DATED 04-07- 2011HE DREW THE ATTENTION OF THE BENCH TO THE QUEST ION NOS. 2 AND 3 WHICH ARE AS UNDER : (II) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE ITAT WAS JUSTIFIED IN DELETING THE DISALLOWANC E OF RS.40,47,074/- ON ACCOUNT OF PRIOR PERIOD EXPENSES WHICH DID NOT PER TAIN TO THE YEAR UNDER CONSIDERATION WHEN THE ASSESSEE IS FOLLOWING MERCAN TILE SYSTEM OF ACCOUNTING? (III) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE ITAT WAS JUSTIFIED IN DIRECTING THE AO TO ALL OW PRIOR PERIOD EXPENSES IN THE YEAR UNDER CONSIDERATION WHICH HAS THE EFFECT OF ENHANCING THE LOSSES AND CARRYING FORWARD OF THE SAME FOR BEING SE T OFF AGAINST THE FUTURE INCOME WHEN THE SAME HAS NOT BEEN CLAIMED BY T HE ASSESSEE IN ITS RETURN OF INCOME AS MANDATED BY THE PROVISIONS OF THE I.T. ACT, 1961. 4.1 REFERRING TO THE ORDER OF THE HONBLE HIGH COUR T HE DREW THE ATTENTION OF THE BENCH TO THE FOLLOWING : 3. AS REGARDS THE QUESTION NOS. II AND III ARE CONCERN ED, THE TRIBUNAL RELYING UPON ITS DECISION IN THE CASE OF KIRLOSKAR PNEU MATIC CO. IN ITA NO.6/PN/2007 FOR THE A.Y. 2003-04 HELD THAT EVEN IF THE EXPENDITURE IS INCURRED IN THE EARLIER YEAR BUT THE DEMAND IS RAISE D AND ACCEPTED IN THE SUBSEQUENT YEAR, THEN THE EXPENDITURE WOULD BE ALLOWA BLE IN THE SUBSEQUENT YEAR. WE SEE NO INFIRMITY IN THE ABOVE OR DER PASSED BY ITAT. ACCORDINGLY, APPEAL IS DISMISSED. HE ACCORDINGLY SUBMITTED THAT THE ISSUE, IN PRINCIP LE, HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE. HE, HOWEVER, SUBMITTED THA T HE HAS NO OBJECTION IF THE MATTER IS RESTORED BACK TO THE FILE OF THE ASSE SSING OFFICER WITH A 5 DIRECTION TO DECIDE THE ISSUE OF CRYSTALLISATION OF THE EXPENSES SINCE THE SAME HAS NOT BEEN EXAMINED BY HIM. 5. THE LD. DEPARTMENTAL REPRESENTATIVE HAS NO OBJEC TION IF THE MATTER IS RESTORED TO THE FILE OF THE ASSESSING OFFICER FO R VERIFICATION OF THE CRYSTALLISATION OF THE EXPENDITURE IN THE LIGHT OF THE DIRECTION OF THE HONBLE HIGH COURT. WE, THEREFORE, RESTORE THIS I SSUE TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO GIVE AN OPPOR TUNITY TO THE ASSESSEE TO SUBSTANTIATE WITH EVIDENCE THAT EVEN THOUGH EXPENDI TURE HAS BEEN INCURRED IN THE EARLIER YEAR BUT THE DEMAND IS RAISED AND AC CEPTED IN THE IMPUGNED ASSESSMENT YEAR SO AS TO CLAIM THE SAME AS ALLOWABL E EXPENDITURE IN THE IMPUGNED ASSESSMENT YEAR. THE ASSESSING OFFICER SH ALL DECIDE THE ISSUE IN ACCORDANCE WITH LAW AFTER GIVING DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. WE HOLD AND DIRECT ACCORDINGLY. THE GRO UND RAISED BY THE ASSESSEE IS ACCORDINGLY ALLOWED FOR STATISTICAL PUR POSES. ITA NO.1287/PN/2013 (BY REVENUE) : 6. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE FILED ITS RETURN OF INCOME FOR THE IMPUGNED ASSESSMENT YEAR ON 30-10-20 07 DECLARING NIL INCOME AS PER REGULAR PROVISIONS AND RS.33,47,76,97 2/- AS PER MAT PROVISIONS. DURING THE COURSE OF ASSESSMENT PROCEE DINGS THE ASSESSING OFFICER NOTED THAT WHILE COMPUTING IT'S INCOME AS P ER MAT, THE ASSESSEE HAD CLAIMED DEDUCTION OF ` 4,13,13,849/- AS PER CLAUSE(III) OF THE EXPLANATION TO THE 2 ND PROVISO OF SUB-SEC(2) OF SECTION115JB. ON PERUSAL OF THE YEAR-WISE DETAILS OF THE BOOK PROFIT, THE BR OUGHT FORWARD LOSSES AND UNABSORBED DEPRECIATION, THE ASSESSING OFFICER FOUN D THAT THE ASSESSEE DID NOT HAVE ANY AMOUNT AVAILABLE FOR SET-OFF AS PER CL AUSE (III) OF EXPLANATION TO SECOND PROVISO OF SUB-SECTION(2) OF SEC. 115JB. THE ASSESSEE SUBMITTED 6 THAT WORKING OF BROUGHT FORWARD LOSS AND UNABSORBED DEPRECIATION WAS BASED ON FIFO METHOD. THE ASSESSING OFFICER HOWEVER , DID NOT ACCEPT THE SUBMISSION OF THE ASSESSEE AND BASED UPON HIS ORDER FOR A.Y. 2005-06 AND A.Y. 2006 WHICH WAS BASED ON AAR DECISION IN THE CA SE OF RASHTRIYA ISPAT NIGAM(RINL) 285 ITR, HE DENIED THE CLAIM ON T HIS ACCOUNT. 7. IN APPEAL THE LD.CIT(A) NOTED THAT FOR A.YRS. 20 05-06 AND 2006-07 SIMILAR CLAIM DENIED BY THE ASSESSING OFFICER WAS U PHELD BY THE CIT(A) AND ON FURTHER APPEAL BY THE ASSESSEE THE TRIBUNAL VIDE ITA NO.519/PN/2009 ORDER DATED 30-09-2011 SETA-ASIDE TH E ISSUE WITH THE FOLLOWING REMARKS : '....IN THIS MANNER, THE ASSESSING OFFICER COMPUTED BOOK PROFITS FOR SECTION 115JB AT RS. 20,24,35,238/- AS AGAINST NIL DETERMINED BY THE ASSESSEE. WE HAVE EXAMINED THE POSITION SET-UP BY THE ASSESSING OFFICE R. QUITE CLEARLY, CLAUSE (III) OF EXPLANATION 1 TO SECTION 115JB ENVISAG ES ADJUSTMENT FOR THE AMOUNT OF LOSS BROUGHT FORWARD OR UNABSORBED DEPRECIAT ION, WHICHEVER IS LESS AS PER BOOKS OF ACCOUNT. IT IS QUITE CLEAR THAT THE LOSS DEPICTED IN THE ACCOUNT BOOKS WHICH COMPRISES OF BUSINESS LOSSES AND DEPREC IATION IS REQUIRED TO BE SPLIT UP FOR THE PURPOSES OF CLAUSE(III) OF EXPLANATION 1 TO SECT/ON 115JB(2). SO, HOWEVER, THE MANNER OF DETERMI NING THE INDIVIDUAL FIGURES OF LOSS AND DEPRECIATION IS NOT INDICATED IN SEC TION 115JB INASMUCH AS THE MANNER IN WHICH THE LOSSES AND- DEPRECIATION ARE SET OFF AGAINST THE PROFITS HAS NOT BEEN SPELT OUT. HOWEVER, AN INDICATION WHICH IS MANIFESTED IN SECTION 115JB ITSELF IS A SAFE PREMISE TO FOLLOW IN SU CH A SITUATION. CLAUSE (III) SPEAKS OF ADJUSTMENT FOR THE LOWER OF BROUGHT FO RWARD LOSS OR UNABSORBED DEPRECIATION. THEREFORE, THE LEGISLATURE E NVISAGED THAT WHILE COMPUTING BOOK PROFITS FOR 115JB, REDUCTION BE ALLOW ED FOR THE LOWER OF CARRIED FORWARD LOSSES OR UNABSORBED DEPRECIATION OF TH E PAST YEARS. THEREFORE, THE DETERMINATION OF SUCH LOSSES OR DEPRECIA TION IN THE PAST YEARS BE ALSO MADE ON SIMILAR PROPOSITION, IN THE ABSENC E OF ANY SPECIFIC PROVISION IN THE STATUTE. EVEN IN THE PAST YEARS, THE LOSSES AND DEPRECIATION TO BE CARRIED FORWARD BE DETERMINED ON THE SIMILAR P RINCIPLES, I.E. AFTER SETTING OFF OF THE LOWER OF DEPRECIATION OR LOSSES. APA RT FROM THE FACT THAT THERE IS NO SPECIFIC PROVISION IN THE STATUTE, WE ARE ALSO GUIDED BY THE SPIRIT OF SECTION 205(18) OF THE COMPANIES ACT, 1956. IN TER MS OF SECTION 201(18) ALSO, THE SURPLUS IS TO BE DETERMINED AFTER REDUCING LO WER OF THE LOSS OR DEPRECIATION. THOUGH STRICTLY SPEAKING THE RULE OF SEC TION 205(18) OF THE COMPANIES ACT IS NOT APPLICABLE, INASMUCH AS FOR THE PU RPOSES OF THE SAID SECTION THE EXPRESSION 'LOSS' INCLUDES DEPRECIATION, WHER EAS FOR THE PURPOSES OF SECTION 115JB IT IS SPECIFICALLY PROVIDED TH AT FOR CLAUSE(III) OF EXPLANATION 1 THE EXPRESSION 'LOSS' SHALL NOT INCLUDE DE PRECIATION. SO, HOWEVER, WE WANT TO EMPHASIS ON THE BASIC PRINCIPLE EN SHRINED IN SECTION 115JB WHEREBY THE LOWER OF LOSS OR DEPRECIATION IS RED UCIBLE TO ARRIVE AT THE SURPLUS. SECTION 115JB(2) ITSELF REFERS TO A PROFIT & LOSS ACCOUNT PREPARED IN ACCORDANCE WITH THE PROVISIONS OF COMPANI ES ACT, 1956 AND THEREFORE, IN OUR VIEW, THE PROPOSITION IN SECTION 20 5(18) BECOMES RELEVANT. FOR THE AFORESAID TWIN REASONS, IN OUR VIEW, IN ORDER TO DETERMINE 7 THE LOSSES CARRIED FORWARD AND UNABSORBED DEPRECIATION IN THE PAST YEARS ALSO, IT WOULD BE APPROPRIATE TO REDUCE THE LOWER OF THE TWO AND THEREAFTER, ASCERTAIN THE AMOUNT OF LOSSES BROUGHT FORWARD AND UNAB SORBED DEPRECIATION. CONSIDERED IN THE AFORESAID MANNER, IN OUR VIEW, THE METHODOLOGY ADOPTED BY THE ASSESSING OFFICER HAS TO FAIL. THIS IS FOR THE REASON THAT HE HAS PROCEEDED TO ADJUST THE UNABSORBED DEPRECIATION AS ON 31.03.2003, WHEREAS THE CORRECT APPROACH WOULD HAVE BEEN COMPARE AND DETERMINE THE LOSSES IN EACH OF THE FINANCIAL YEARS STARTING FROM THE FINANCIAL YEAR 1996-97 AND DETERMINE THE LOSS OR DEPRECIATION WHICH IS REQUIRED TO BE CARRIED FORWARD IN ACCORDANCE WITH THE AFORESAID DISC USSION. IN FACT, WE FIND THAT EVEN THE WORKING ADOPTED BY THE ASSESSEE IN T HE RETURN OF INCOME ALSO DOES NOT CORRESPOND THE AFORESAID PRINCIPLES. UNDER THESE CIRCUMSTANCES, WE, THEREFORE, DEEM IT FIT AND PROPER TO SET-ASIDE THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS) AND TO REM IT THE MATTER TO THE FILE OF THE ASSESSING OFFICER, WHO SHALL REVISIT THE WORKING OF BOOK PROFIT FOR THE PURPOSE OF SECTION 115JB IN SO FAR AS IT RELATES TO CLAUSE(III) OF EXPLANATION 1 TO SECTION 115JB(2) OF THE ACT. THE A SSESSING OFFICER SHALL CARRY OUT THE AFORESAID LIMITED EXERCISE IN ACCORDANC E WITH OUR AFORESAID DISCUSSION AND AFTER ALLOWING THE ASSESSEE A REASONABLE OPP ORTUNITY OF BEING HEARD AS PER LAW. ' 7.1 SIMILAR DIRECTIONS WERE ALSO GIVEN BY THE TRIBU NAL FOR A.Y. 2006- 07. THE CIT(A) THEREFORE ASKED THE ASSESSEE TO GIV E WORKING U/S.115JB OF THE I.T. ACT ON THE BASIS OF THE DIRECTION OF THE T RIBUNAL. AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE, HE NOTED THAT AS PE R WORKING AS PER THE DIRECTION OF THE TRIBUNAL, THE BUSINESS LOSS IS RS. 54,04,92,413/- AND UNABSORBED DEPRECIATION OF RS.8,36,11,321/- WHICH B EING LEAST OF THE TWO IS REQUIRED TO BE REDUCED FOR BOOK PROFIT CALCULATI ON. HE ACCORDINGLY FOLLOWING THE DECISION OF THE TRIBUNAL IN ASSESSEE S OWN CASE FOR A.Y. 2005-06 DIRECTED THE ASSESSING OFFICER TO REDUCE TH E BOOK PROFIT BY RS.8,36,11,321/- FOR CALCULATION OF MAT PROFIT U/S. 115JB OF THE I.T. ACT. 7.2 AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REV ENUE IS IN APPEAL BEFORE US. 8. AFTER HEARING BOTH THE SIDES, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) WHICH IS IN CONFORMITY WITH THE DIRECTION OF THE TRIBUNAL. THE LD DEPARTMENTAL REPRESENTATIVE COULD NOT POINT OUT ANY MISTAKE NOR COULD BRING ANY CONTRARY MATERIAL AGAIN ST THE DIRECTION OF THE 8 TRIBUNAL WHICH HAS BEEN FOLLOWED BY THE CIT(A) WHIL E DECIDING THE ISSUE. UNDER THESE CIRCUMSTANCES, WE DO NOT FIND ANY INFIR MITY IN THE ORDER OF THE CIT(A) AND ACCORDINGLY UPHOLD THE SAME. THE GROUND S RAISED BY THE REVENUE ARE DISMISSED. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES AND THE APPEAL FILED BY THE RE VENUE IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 30-07-2014. SD/- SD/- (SHAILENDRA KUMAR YADAV) (R.K. PANDA) JUDICIAL MEMBER ACCOU NTANT MEMBER PUNE DATED: 30 TH JULY, 2014 SATISH COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. DEPARTMENT 3. THE CIT(A)-V, PUNE 4. THE CIT-V, PUNE 5. THE D.R, A PUNE BENCH 6. GUARD FILE BY ORDER // TRUE COPY // SENIOR PRIVATE SECRETARY ITAT, PUNE BENCHES, PUNE