115JB

In arriving at the book profit under Section 115JB, lower of brought forward loss or unabsorbed depreciation as per books of account is allowed, irrespective of whether it is allowable or not allowed to be carried forward under section 79 of the Act



Fascel Ltd. v. ITO / DCIT v. Fascel Ltd. [2008] 305 ITR 368 (AT)



The taxpayer sought deduction of brought forward book loss relating to the assessment year (AY) 2000-01 and earlier years in computing the liability under section 115JB of the Act. According to the books of account of the taxpayer, there was a loss relating to earlier years.

The AO held that the brought forward loss was not allowable under section 115JB as it included a part of the loss relating to the AY 2000-01 and earlier years which was not allowable under section 79 of the Act since there was change in the shareholding in that year.

The CIT(A) held that section 115JB(5)14 read with section 79 permitted the taxpayer to avail of set off of book losses only in respect of the AY 2001-02 and subsequently and not for the earlier AYs being prior to the substantial change in shareholding.

The Tribunal held that from a combined reading of section 115JB(1), (2) and the Explanation provided thereunder, it was evident that the loss according to the books of account had to be considered and the admissibility of loss according to the other provisions of the Act was not relevant for the computation of book profit.

The Tribunal held that section 115JB(5) reincorporates only those provisions of the Act which are not otherwise provided in section 115JB. The Tribunal further held that clause (iii) of the Explanation to section 115JB specifically provides for the allowance of brought forward loss or unabsorbed depreciation and, therefore, the other provisions of the Act relating to earlier years’ loss or unabsorbed depreciation would not be applicable. The Tribunal further relied on Circular no. 1315 and held that the abovementioned clause applies only to provisions other than computation and since the loss or unabsorbed depreciation is a part of the computation of book profit under section 115JB, the provisions of section 115JB(5) would not include other provisions of the Act. Accordingly, it was held that in arriving at the book profit, the lower of the amount of brought forward loss or unabsorbed depreciation as per the books of account had to be allowed irrespective of whether it was allowable or not under the provisions of the Act.

Therefore, the amount of loss brought forward or unabsorbed depreciation for AY 2000-01 and earlier years was allowable irrespective of the fact that such loss was not allowed to be carried forward under section 79 of the Act.