The Delhi Income Tax Appellate Tribunal ( ITAT ) set aside order deleting disallowances on account of loss on revaluation of fixed assets.
The CIT (A) in the case of Railtel Corporation of India Ltd., deleted the disallowance made by the Assessing Officer on account of loss on revaluation of fixed assets and the corresponding increase in ‘book profits’ for the purposes of Section 115JB of the Act. Aggrieved by the disallowance the revenue filed an appeal before the ITAT.
Mr. Vijay Kataria counsel for the assessee submitted that the loss incurred by the assessee was on account of settlement and is not in the nature of revaluation loss as incorrectly captioned in the financial statement. The assessee further pointed out that the assessee has not claimed any corresponding revaluation reserve in relation to such loss on account of any provision for diminution in the value of the asset. It was thus contended that the Assessing Officer is not entitled to disturb the book’s results and it is not liable to pay any alternative tax on account of adjustment in the book profit under Section 115JB.
Mr. Ajay Kumar Mitta, CA, on behalf of revenue, contended that the impugned loss is the capital loss in nature which are not allowable as revenue expenditure even under normal provisions and therefore liable to be adjusted for the purposes of determination of book profit which is the only alternate scheme of taxation in certain circumstances. Accordingly, the revenue relied upon the action of the Assessing Officer and urged for reversal of the order of the CIT(A).
The Coram of Mr. Saktijit Dey, Judicial Member, and Mr. Pradip Kumar Kedia, Accountant Member has held that “the assessee is not entitled to reduce the book profit by the capital loss debited to the P&L account which is the subject matter of qualification by Auditors. Such capital loss is neither eligible for deduction under the normal provisions nor under the alternate provisions of taxation. We thus set aside the action of the CIT(A) on this score and restore the position taken by the Assessing Officer”.
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