COVEMA FILAMENTS LTD. Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) The appeal of the assessee is from the order of the Income Tax Appellate Tribunal [for brevity "the Tribunal"] for the assessment year 2006-07.

(2.) The first question is with respect to the unabsorbed depreciation/business loss; the lower of which was to be granted deduction while computing tax under Section 115JB of the Income Tax Act, 1961 [for brevity "the Act"]. Whether the figures are to be taken as per the books of accounts or as permissible under the Income Tax Rules; is the question raised. The Tribunal found that there is no restriction as provided under 115JB and that it has to be from the books of accounts. The issue was remanded to the Assessing Officer [for brevity "AO"] for consideration. The assessee has raised a question on this in the present appeal only because the remand report of the AO had specifically indicated the facts. In any event, the last fact finding authority, the Tribunal, having remanded the matter, holding the issue in favour of the assessee, and there is no appeal by the Revenue; we would not interfere such consideration by the AO in accordance with the order of the Tribunal. There is no question of law arising from the aforesaid issue.

(3.) The next issue is on the provision for interest in a Bank loan made for the earlier years; from 2000-01 to 2005-06, being permissible as a deduction under Explanation 1(i) to Section 115JB(2). On facts, it has to be noticed that the assessee's specific claim was that though the interest was shown as a provision in the earlier years, the same was disallowed under Section 43B. It is also contended that in computation of the MAT under Section 115JB, this amount was added back as an unascertained liability in the earlier years. The assessee had been communicating with the Bank as to a One Time Settlement [OTS] during the said period. Eventually in the previous year relevant to the subject year, 2006-07, the matter was settled with the Bank. The entire interest was waived by the Bank and also a portion of the principal. The interest so debited to the profit and loss account for the earlier years was, hence, debited from the reserve and credited to the profit and loss account for the subject year. The same had to be deducted under Explanation (i) to Section 115JB(2).