The High Court of Karnataka held that the tribunal has not dealt with the claim of the assessee for deduction under Section 10A of the Income Tax Act, 1961.
The assessee, M/S Yokogawa India Ltd. is engaged in the business of manufacture, trading, and distribution of processed control instruments. It filed a return of income for the Assessment year declaring an income. The return of income was processed under Section 143(1) of the Act and a refund was issued by way of adjustment against the demand for the Assessment year. Meanwhile, the assessment was taken up for scrutiny and a notice under Section 143(2) of the Act was issued to the assessee. In response to the notice, the assessee entered an appearance. The assessing officer vide order inter alia held that the profit and loss account of the assessee shows that an amount of Rs.209.30 Lakhs is the total brought forward loss of the previous year, which is to be considered for the purposes of Section 115JB of the Act.
It was held that the assesses representative stated that the amount of Rs.209.30 Lakhs consists entirely of unabsorbed depreciation and it has no element of brought forward business loss in it. Thus, it was held that no amount of brought forward loss has to be reduced in the computation of income. The assessee filed an appeal before the CIT(A). CIT(A) by an order inter alia held that when there is a loss shown in the books of accounts, it has to be considered and there is no reason to go beyond to discover its genesis.
The tribunal held that the net profits have to be determined as per provisions of Companies Act and thereafter adjustments have to be made. It was further held that assessee cannot adjust the book profit except as provided under the Companies Act and in the instant case, the assessee is trying to compute the brought forward losses under the income tax provisions and not under the Companies Act, which is not permissible.
The division judge bench of Justice Alok Aradhe and Justice Hemant Chandangoudar held that the tribunal has not dealt with the claim of the assessee for deduction under Section 10A of the Income Tax Act, 1961. Consequently, the court remanded the matter back to the tribunal for a fresh decision.
“The tribunal has held that net profits have to be determined as per the provisions of the companies Act and thereafter, the adjustments have to be made. It has further been held that the assessee cannot adjust the books of profit except as provided under the Companies Act. While passing the order, the tribunal has misconstrued the relevant statutory provisions,” the court observed.Subscribe Taxscan AdFree to view the Judgment