The Delhi bench of the Income Tax Appellate Tribunal ( ITAT ) responded to the taxpayer’s challenge against the Assessing Officer’s disallowance, which was deemed inconsistent with Section 115JB of the Income Tax Act, 1961 by directing the restoration of the matter for factual verification.
The fact in brief is the assessee is a resident corporate entity, stated to be engaged in the business of flying, operating, letting on hire, lease and charter hire of helicopters and providing aviation services in respect of helicopters For the assessment year under dispute, the assessee filed its return of income on 30.11.2015 declaring NIL income under the normal provisions of the Act and book-profit of Rs.10,72, 11,670/- under Section 115JB of the Income Tax Act.
The Assessing Officer ( AO ) noticed that the assessee has reduced an amount of Rs.43,60,42,388/-, being the lower of the brought forward loss or unabsorbed depreciation, in terms of clause (iii) under Explanation 1 to section 115JB of the Income Tax Act. Noticing this, the AO called upon the assessee to furnish a detailed working.
In response, the assessee furnished its reply, stating that the deduction has been incorrectly computed and the correct figure of deduction should be Rs. 51,20,83,841/-. In this context, the assessee furnished a detailed working of deduction.
Mr. Deepak Chopra representing the assessee submitted that the difference between the revised deduction claimed by the assessee of Rs.51,20,83,841/- and the deduction allowed by the Assessing Officer of Rs. 32,29,19,988/- is Rs.18,91,63,853/-
He submitted, the difference arose on account of miscalculation by the AO and there was no legal basis to reconsider the additions/deductions made by the assessee in its return of income for preceding years while calculating book profits for the current year as per Section 115JB of the Income Tax Act.
Further submitted, as per Section 115JB of the Income Tax Act, the calculation of book profits must relate to the entries made in the books for the relevant year and such calculation must start from the profit as shown in P&L account. Thereafter, the amount of loss brought forward or unabsorbed depreciation, whichever is less, as per the books of account, must be considered in terms of clause (iii) under Explanation 1 to Section 115JB of the Income Tax Act.
The two member bench of the tribunal comprising Dr B.R.R Kumar ( Accountant member ) and Sakti Jit Dey ( Vice President ) observed that the assessee’s claim of deduction for computing book profit under Section 115JB of the Income Tax Act required fresh verification in the light of the Chart furnished by the assessee, which has been reproduced in the order.
Accordingly, the issue was restored back to the AO for fresh adjudication after factually verifying assessee’s claim by referring to the Chart. It was also directed that the Assessing Officer must provide reasonable opportunity of being heard before deciding the issue. Accordingly, the grounds were allowed.
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