This detailed analysis reviews the Income Tax Appellate Tribunal decision in the case of ITA No. 1706/DEL/2019 involving the Additional Commissioner of Income Tax, Circle-10 (2), New Delhi, and Gutermann India Pvt. Ltd. for the assessment year 2015-16. This case centers on the correct interpretation of brought forward loss and unabsorbed depreciation under Section 115JB of the Income Tax Act, 1961.
The primary issue in this appeal by the Revenue was whether the brought forward loss or unabsorbed depreciation should be calculated on a year-to-year basis or on an accumulated basis for the purpose of reducing net profit as per the profit and loss account.
The tribunal examined various precedents and statutory interpretations to conclude that for the purposes of computing the deduction under clause (iii) of Explanation (1) to section 115JB(2), a holistic view of unabsorbed depreciation and brought forward losses over the years should be considered as one composite figure rather than on a year-by-year basis.
The decision elaborates on previous judgments and how they align with the interpretation of Section 115JB, highlighting the tribunal’s reliance on a composite figure approach. This analysis includes a detailed discussion on how this interpretation impacts the calculation of book profits for corporate entities.
This case serves as a significant precedent for corporates on how book profits are to be calculated and the importance of understanding the nuances of tax laws related to loss and depreciation. The tribunal’s decision supports a broader and more beneficial interpretation for businesses in similar fiscal situations.
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