Law:

Section:

Section 115JB of the Income-tax Act, 1961 - Minimum alternate tax - Assessment years 2002-03 to 2005-06 - Whether in view of section 115JB assessee does not have option to reduce current year's profit by loss brought forward or unabsorbed depreciation (for purpose of carry forward under section 115JB), in its accounts, in a manner different from manner adopted for determination of 'book profit' under section 115JB - Held, yes - Whether assessee does not have discretion to reduce current year's profit, either by loss brought forward or unabsorbed depreciation and lesser of two is required to be reduced from current year's income - Held, yes - Whether after making reduction in one year, assessee cannot adopt a different method in subsequent years, and assessee cannot reduce current year's profit partly by business loss brought forward and partly by unabsorbed depreciation - Held, yes FACTS The applicant/assessee company commenced its commercial operations during the year 1990-91. The applicant claimed business loss/unabsorbed depreciation for the financial years 1990-91 to 2001-02, i.e., for 12 years amounting to Rs. 1,755 crores, being cumulative business loss and Rs. 3,227 crores being unabsorbed depreciation. The applicant had shown net profit of Rs. 521 crores, Rs. 1,547 crores and Rs. 2,250 crores for the accounting periods 2002-03, 2003-04 and 2004-05, respectively. In terms of section 115JB(2), the net profit has to be reduced by business loss or unabsorbed depreciation, whichever is less. The applicant for the purpose of MAT reduced a net profit by business loss, but for the purpose of carry forward of business loss/depreciation for the subsequent year, had altogether changed the manner by setting off current year's profit of Rs.521 crores against unabsorbed depreciation of Rs. 3,227 crores in its books of account, instead of reducing the profit by business loss of Rs. 1,755 crores, as required under section 115JB. The applicant had, therefore, computed the carry forward of unabsorbed depreciation at Rs. 2,706 crores (i.e., Rs. 3,227 crores - Rs. 521 crores) and unabsorbed business loss at Rs. 1,755 crores. The same methodology had been adopted for the…

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