1.   ITA No. 863 of 2009 Judgment Pronounced On: 08th October, 2010. CIT Vs. SUMI MOTHERSON INNOVATIVE ENGINEERING LTD., DELHI HIGH COURT

Brief facts of the case

The assessee had brought forward losses pertaining to the financial year prior to the relevant previous year. However, during the relevant previous Year, the brought forward accumulated losses of the assessee were eliminated because of the reduction in the share capital, as a result of which, at the year end, there was no brought forward loss as per books of accounts. 

The assessee claimed that for the purposes of MAT brought forward losses are to be seen at the last day of the preceding previous year, whereas the AO opined that the same are to be seen at last day of the relevant previous year. The CIT(A) confirmed the action of the AO, which was reversed by the ITAT.  

Substantial Question of Law before the Court 

(a)       Whether the learned ITAT was correct in law and on merits in holding that the assessee is entitled to deduction of brought forward losses even though the losses have been liquidated during the course of the year and nothing was left to be available for set off?  

(b)       Whether for the purposes of Section 115JB of the Act, only the accumulated losses as per the books of account shall be set off for the exclusive purpose of MAT?”   

Para 15:        

The AO has given his own rationale in choosing last date of the financial year, which is the subject matter of assessment for the purpose of ascertaining the amount of unabsorbed losses brought forward. On the other hand, the order of the Tribunal provides its own justification for adopting the last day of the preceding year /first day of the current financial year. Both the rationale appear to be convincing. In such circumstances, the answer to the question would depend upon the language of the provision, as that depicts the intention of the legislature. As pointed out above, decision in this respect must rest upon the provisions of the Explanation below Section 115JB (iii) of the Act. This explanation categorically and unhesitatingly uses the term „loss brought forward‟. The meaning that is to be assigned to this term would be naturally, the loss on the last date of the immediately preceding year, which is to be brought forward to the financial year in question. Clause (iii) provides for the amount of loss brought forward. What happens during the course of the year is not relevant, as under the scheme of the aforesaid provision no such contingency is taken note of.

(Please click here for judgment)

2.   ITA No.4012/Ahd/2008 order Pronounced On: 12^th November,, 2010. M/s Vodafone Essar Gujarat Ltd. (Formerly known as Fascel Ltd.) Vs. ACIT (ITAT Ahmedabad Bench)

Brief facts of the case

The assessee has aggregated the unabsorbed business loss and unabsorbed depreciation of all the earlier assessment years and thereafter reduced the lesser of the two totals. However, as per AO for each A.Y. independently, the unabsorbed business loss and unabsorbed depreciation is to be worked out and the lesser of the two is to be allowed to be adjusted from the book profit. The AO also did not allowed the benefit of book losses for the want of section 79 of the Act.

The CIT(A) confirmed the action of the AO,

The ITAT held that for the purpose of MAT loss as per books of account of the assessee should be considered irrespective of the fact whether it is allowable u/s 79 of the Act.