B.M. Kothari, Accountant Member -
(1.) THIS appeal is directed against the order passed by Shri K.K. Basu, the learned CIT (Appeals), Baroda for assessment year 1990-91.
(2.) The first ground relates to disallowance of Rs. 10,253 made by resort to Section 40A(2) out of the freight paid to M/s Geetanjali Road Lines and M/s Vishal Hind Roadways. This point has been discussed by the Assessing Officer (A.O.) in para 5(u) on pp. 3 & 4 of the assessment order. The appellant-company paid freight amounting to Rs. 35,870 to M/s Geetanjali Roadways and Rs. 3,74,265 to M/s Vishal Hind Roadways. The Assessing Officer observed that Shri Balbir singh Goyal, Director of the appellant-company is an interested person in these two payee concerns. It was, therefore, proposed as to why 10 per cent of expenses paid to them be not disallowed as to that extent the Assessing Officer considered the payment as excessive freight paid to sister concerns of the assessee-company. After considering the facts stated in letter dated 22-2-1993 of the assessee-company, the Assessing Officer arrived at the conclusion that 2.5 per cent of the total payment aggregating to Rs. 4,10,135 paid to these two sister concerns is disallowable under Section 40A(2). Accordingly disallowance of Rs. 10,253 was made.
2.1 The learned CIT (Appeals) has discussed this point in paras 3 to 3.7 of his order. He has confirmed the action of the Assessing Officer.
2.2 The learned counsel for the assessee submitted before us that M/s Geetanjali Road Lines is a sole proprietorship concern of Mr. B.S. Goyal, one of the Directors of the company. However, M/s Vishal Hind Roadways is a partnership firm constituted by three partners S/Shri Sher singh Madan, Harish singh Madan and Vinod Madan who are not in any manner related to the Directors of the appellant-company and payments made to that party is not covered within the ambit of Section 40A(2). It was further pointed out that freight payments made to these two parties were reasonable and were based on commercial considerations. In order to corroborate this contention, the learned counsel invited our attention towards quotation letter dated 18-8-1989 from M/s Alka Roadlines who demanded freight for transportation of goods from Bombay Docks to Halol factory at the rate of Rs. 2,500 per truck while the same party vide letter dated 29-4-1989 demanded transport charges @ Rs. 2,000 per truck. The details of transport charges made to these two parties submitted in the compilation were also shown with a view to indicate that payment of freight had been made to these parties at the rates ranging between Rs. 2,000 to Rs. 2,400 per truck. It was pointed out that transport contract in the normal course will be given to a party who is more reliable and trustworthy. Our attention was also invited towards a copy of letter dated 4-3-1993 submitted to the Assessing Officer in which relevant details were submitted with a view to prove that the payment of freight made to these two parties were the normal rate of transportation prevailing at the relevant time and such payments were made solely on business considerations. It was further pointed out that Shri B.S. Goyal, Director of the company has no relation with other Directors of the company and he does not hold any shares of the appellant-company. On the strength of these facts and submissions, the learned counsel urged that the disallowance should be deleted.
2.3 The learned D.R. relied upon the reasons mentioned in the orders of the departmental authorities and submitted that the CIT (Appeals) has rightly confirmed the disallowance in question.
2.4 In our view the disallowance of Rs. 10,253 made out of freight payments made to these two parties cannot be sustained. The Assessing Officer has failed to bring any material on record to prove that such expenditure incurred by the assessee is in any manner excessive or unreasonable having regard to the fair market value of the services rendered. The very fact that the Assessing Officer, after issuing a show-cause notice proposing to disallow 10 per cent out of freight payments made to these two parties, was himself convinced after going through the facts and explanations submitted on behalf of the assessee and he reduced the proposed disallowance to only 2.5 per cent, by itself proves that the rate of freight charges paid by the assessee to these two parties was reasonable and was based on commercial considerations. No basis has been indicated in the assessment order as to why and how the Assessing Officer considered only 2.5 per cent as unreasonable and execessive out of the aggregate freight payments of more than Rs. 4 lakhs. In view of the facts stated in the letters submitted before the Assessing Officer and in view of the relevant details shown to us from the documents submitted in the compilation, we are of the considered opinion that payment of freight charges made to these two parties by no stretch of imagination be regarded as excessive or unreasonable. The disallowance is, therefore, cancelled.
The second ground relates to addition of Rs. 21,98,898 made on account of low yield. This point has been discussed by the Assessing Officer in para 5(iu) at pp. 6 to 9 of the assessment order. The assessee-company imports/ purchases mutilated woollen rags etc. from foreign countries and through the various processes or production manufactures yarn which are sold in Amritsar and Panipat markets. The accounts of the appellant-company have been audited as required under the provisions of the Companies Act as well as under Section 44AB of the IT Act, 1961. As per the tax audit report enclosed with the return ofincome the yield shown by the assessee comes to 72.2 per cent. The Assessing Officer observed that in this line of business the yield normally comes to 75 per cent to 78 per cent. He, therefore, scrutinised the books of account, various details and records produced by the appellant-company with a view to examine the correctness of the yield shown by the assessee. The assessee submitted explanations from time to time to corroborate the correctness of the declared yield. The Assessing Officer was not satisfied with the explanations so submitted from time to time and he came to the conclusion that 50 per cent of the losses suffered in the various processes of production as claimed by the assessee should be regarded as unreasonable and accordingly an addition of Rs. 21,98,898 was made by holding that the appellant-company tried to hide the production byway of increasing the losses under four processes much more than the real loss actually suffered in such processes of production.
3.1 The learned CIT (Appeals) has considered this point in paras 5 to 5.7 at pages 6 to 10 of his order. He confirmed the addition of Rs. 21,98,898.
3.2 Shri C.V. Kothari, the learned counsel for the assessee, briefly explained the details of manufacturing process and submitted a brief note explaining the same which reads as under :
We import mutilated woollen rags etc. from Australia, America and European countries. These rags are sorted and graded colour-wise and quality-wise. Thereafter, stripping of the same is carried out manually by labourers. In this process undesired and foreign material is removed to attain the desired quality of rags before tearing. In the process of stripping following waste is generated :
(1) Astar (2) Bukram (3) Chain (4) Buttons (5) Fur (6) Leather pieces (7) Metallic parts etc. After this process is carried out the stripped rags are processed through tearing, machines to reclaim fibre. In this process also following waste is generated:
(1) Short fibres (2) Chindi (3) Invisible loss like flying of shortest fibres etc. Thus the blend is produced after tearing action is over. This blend is then processed through carding machine to open and parallel the fibre before being spun on Ring Frame machines. In this process also some wastes are generated :
(1) Dust (2) Dropping (3) Felting waste (4) Chindi (5) Winding wastes etc.
Finally yarn is produced of desired count and quality which is sold in Amritsar and Panipat market.
It was pointed out by him that the percentage of yield shown in the Tax Audit Report has been arrived at by taking the total quantity of opening stock and closing stock without bifurcating the same separately into opening and closing stock of raw material and semi-finished goods (SFM). If the excess of closing stock of SFM over the opening stock of SFM is converted into raw material or vice-versa and then the percentage of yield of finished material is calculated with reference to raw material consumed, the percentage of yield in the year under consideration will come to 79.42 per cent as per the details submitted in the compilation at page 4. According to the Assessing Officer the normal percentage of yield in this line of business ranges between 75 to 78 per cent. If this is compared with the yield computed as per the correct method as per details given at page 4 of the compilation, the yield shown by the assessee will be found to be better and does not warrant any suspicion or disbelief about the correctness of the declared yield. One of the reasons explained by the assessee for supporting the correctness of the declared yield at all stages of the proceedings before the Assessing Officer as well as before the CIT (Appeals) is that the assessee-company has written off 25433 kgs. of material which was misappropriated by one spinning unit namely M/s Jai Gurdeva Spinning Mills Pvt. Ltd., Ropar, Punjab from where the company was getting the job work of spinning done in earlier years. The owner of the said unit had sold the unit to a third party and chances of recovery of the material from that party became extremely doubtful. The appellant-company filed a suit against that party to recover the money which was still pending. Since the chances of recovery was very narrow the company thought it fit to write off the quantity. The learned counsel further submitted that the appellant-company has maintained complete quantitative details. The correctness of the declared results are supported by correct and complete books of account regularly maintained by the assessee. Such records were duly produced before the Assessing Officer and the same were subjected to test check. He invited our attention towards para 3 of the assessment order wherein it has been clearly stated that books of account have been produced and the same have been test checked. The assessee filed detailed information called for vide various query letters which are verified. He further argued that in the immediately subsequent year assessment year 1991-92 the assessee declared yield of 68.7 per cent calculated in similar manner as has been reproduced in the tax audit report for assessment year 1990-91 showing yield of 72.2 per cent. The correctness' of declared yield of 68.7 per cent has been accepted by the assessing authority in the case of the assessee for assessment year 1991 -92. A copy of the assessment order for assessment year 1991-92, completed under Section 143(3) on 31-3-1994 has been placed on records. The learned counsel also invited our attention towards the other relevant details and documents submitted in the compilation to support his argument that on the facts and in the circumstances of the present case, the learned CIT (Appeals) ought to have accepted the declared results as true and correct and entire amount of addition made in the declared manufacturing results ought to have been cancelled.
3.3 The learned D.R. submitted that the assessee did not produce the stock register before the Assessing Officer which was specifically required to be produced by a letter dated 14-12-1992. He also submitted that in spite of repeated opportunities granted to the assessee it did not furnish any evidence to corroborate the correctness of loss at Ropar in respect of 25433 kgs. alleged to have been sent in earlier years to M/s Jai Gurudev Spinning Mills Pvt. Ltd., Ropar for carrying out the job work of spinning. No material or evidence has been produced by the assessee to prove the reality of the loss of the said 25433 kgs. The assessee did not furnish any such evidence even before the CIT (Appeals). A copy of the plaint submitted in the court against M/s Jai Gurudev Spg. Mills has also not been made available to the departmental authorities. He vehemently supported the order of the CIT (Appeals) and relied upon the elaborate reasons mentioned in the assessment order as well as in the order of the CIT (Appeals) and submitted that the addition has rightly been confirmed.
3.4 At this stage the Bench required the learned counsel for the assessee to submit a copy of the plaint filed in the suit against M/ s Jai Gurudev Spg. Mills and also required the learned D.R. to file copy of the order sheet of the relevant assessment proceedings with a view to ascertain as to whether the Assessing Officer after receiving the necessary quantitative details again required the assessee to produce the stock register or not. The desired documents have been submitted by the learned representatives of both the parties.
3.5 In the rejoinder the learned counsel for the assessee, while showing the copy of the plaint submitted that since the suit against the said party has been submitted on or after 12-8-1991, he would concede to the addition in respect of the value of raw material weighing 25433 kgs. claimed by way of loss at Ropar. It was submitted that the average cost of raw material as per chart at page 5 of the compilation comes to Rs. 9.56 per kg. and the disallowance may be made at the rate of Rs. 10 per kg. He, however, submitted that such a disallowance will have to be made by holding that stock to that extent was lying with the Ropar party to whom the goods went sent for carrying out the job work of spinning as at the clause of the relevant accounting year.
3.6 We have carefully considered the rival submissions made by the learned representatives of the parties. We have also carefully gone through the orders of the departmental authorities and all other details and documents to which our attention was drawn during the course of hearing. We will first deal with the arguments advanced on behalf of the department that the assessee did not produce the stock register as required by letter dated 14-12-1992. The letter dated 14-12-1992 is a detailed query letter in which numerous details were required. One of the several points mentioned in the said query letter, inter alia, required the assessee to produce stock register. Thereafter the assessee's representative attended the hearings on various subsequent dates and produced the required details from time to time. A perusal of" the order sheet of the subsequent dates reveals that the assessee produced the required details which were kept in records after necessary verification. In none of the subsequent order sheet entries the Assessing Officer, at any time, required the assessee to produce the stock register nor there is any specific mention in any of the order sheet entries that the stock register has not been produced. The entries in the order sheet on all the dates subsequent to 14-12-1992 in brief indicates that the assessee complied with all the requirements by producing the required details. Such details were verified and placed on records. Similar observations have been made by the learned assessing authority in para 3 of the assessment order as rightly pointed out by the learned counsel for the assessee. The accounts maintained by the appellant company have been audited by the auditors in accordance with the provisions of Section 44AB. The entire purchases and sales are supported by proper vouchers, entries in the financial books of account and are also supported by complete quantitative details. The assessee submitted letter dated 20-1-1993 in which justification relating to correctness of the yield of 72.2 per cent shown in the tax audit report was given. It was, inter alia, pointed out that the company is maintaining complete record of the material received, processed, production, despatches and account of all the losses which the company incurred during the various processes of production. The contention relating to writing off of 25433 kgs. of material sent to Jai Gurudev Spg. Mills was also brought to the notice of the Assessing Officer. The fact of having filed a suit against that party was also notified to the Assessing Officer in the said letter. Thereafter letter dated 4/5-3-1993 was submitted to the Assessing Officer. This contained elaborate explanation regarding the correctness of the declared yield. A copy of the said explanation has been submitted at pages 36-37 of the paper book. The learned Assessing Officer, after examining all the relevant details and after verifying the same could not point out any specific item of inflation of any purchase of raw material, any instance of unaccounted sale, any reliable and authentic basis for holding that the yield obtained by the appellant company in the manufacturing process was low as compared to any other specific comparable case except in relation to one of the items of loss at Ropar for 25433 kgs. not supported by corroborative evidence. This explanation relating to loss at Ropar was also voluntarily submitted by the assessee while explaining the correctness of the declared yield vide its letter dated 20-1-1993. We are, therefore, of the considered opinion that on the facts and circumstances of the present case, the correctness and completeness of the books of account maintained by the appellant company cannot be rejected. The Assessing Officer has also failed to point out any material to show that no method of accounting has been regularly employed by the appellant company. Therefore, the provisions of Section 145(2) cannot be invoked on the facts and in the circumstances of the present case.
3.7 The question then arises as to whether the proviso to Section 145(1) could be invoked on account of the fact that loss claimed on account of writing off 25433 kgs. could not be properly supported by the assessee as having accrued in the year under consideration. In our view the proviso to Section 145(1) would be clearly attracted as the correct income of the year under consideration cannot properly be deduced without taking into consideration the fact relating to claim of loss at Ropar in respect of 25433 kgs. A perusal of the copy of the plaint dated 12-8-1991 filed in Special Civil Suit No. 91 of 1991 in the Court of Civil Judge (Senior Division) at Godhra against M/s Jai Gurudev Spg. Mills shows that material weighing only 14256.1 kgs. of raw material remained with that party. The assessee claimed loss on account of the said quantity of material by applying the rate of Rs. 11.50 per kg. and thereby claimed a decree for a sum of Rs. 1,63,945 in addition to interest and cost etc. The said suit was valued at Rs. 2,21,325 inclusive of the value of goods and interest thereon. The learned counsel for the assessee was not able to reconcile the vast difference between the quantity mentioned in the said suit and the quantity written off in the stock records and claimed as loss in the quantitative details furnished before the departmental authorities. From the quantitative details furnished before the Assessing Officer it is obviously an admitted fact that the assessee claimed loss to the extent of 25433 kgs. while the stock left with that party as per copy of the plaint is only 14256.1 kgs. There is no explanation whatsoever to support the claim for loss made in the year under consideration in respect of the balance quantity of almost 11,178 kgs. As regards the value of such raw material claimed by way of loss at Ropar it is not known from the details furnished in the compilation as to whether the partly processed raw material was sent to the said party for carrying out the process of spinning or the raw material in the form of mutilated woollen rags were sent. Since the assessee itself has claimed the rate of Rs. 11.50 per kg. in the suit filed against the said party, the same rate would be the most appropriate rate for working out the amount of addition in respect of the said loss at Ropar claimed by the assessee. The fact that the assessee filed the suit against the said party on or after 12-8-1991 clearly indicates that the assessee had not lost hope of recovering the material from the said party as at the close of the accounting year in question which ended on 31-3-1990. The suit has been filed more than one year four months after the date of the accounting year. Therefore, the loss claimed by the assessee was premature in the year under consideration and cannot be allowed as a deduction for computing the income from business. We are, therefore, of the considered opinion that addition to the extent of Rs. 2,92,480 being the value of 25433 kgs. at the, rate of Rs. 11.50 per kg. deserves to be sustained. We would also clarify that out of the aforesaid quantity of 25433 kgs., quantity of only 14,256 kgs. remained with the Ropar party and the assessee failed to submit any explanation with regard to the balance quantity of loss claimed to the extent of 11,177 kgs. The question relating to allowability of loss in respect of 14,256 kgs. can be considered only in the year in which the suit is finally decided. We cannot express any opinion about the allow ability of an item which obviously pertain to some subsequent year with which we are not concerned.
3.8 In view of the aforesaid discussions, we direct the Assessing Officer to reduce the addition to only Rs. 2,92,480 as against the addition of Rs. 21,98,898 made by him. The order of the CIT (Appeals) in relation to this point is modified accordingly.
(3.) THE next ground is ground No. 3 which is reproduced hereunder :
3. THE learned CIT (Appeals) has erred in not appreciating the facts and the circumstances properly and has upheld the working of ACIT under Section 115J.
Your petitioner pray your honour to hold that appellant's working under Section 1.15J is proper and allow the claim accordingly.
4.1 THE appellant company filed return of income along with working of book profit under Section 115Jofthe Income-tax Act, 1961 as per details mentioned below:
Accordingly, the company has paid tax under Section 115J of Rs. 2,90,079.
THE Assessing Officer sent an intimation under Section 143(1)(a) on 26-3-1991 revising the book profit under Section 115J as under :
Tax payable including additional tax, interest under Sections 234B and 234C was determined at Rs. 6,52,641 under Section 115J. THE assessee submitted application for rectification to revise the said demand which was rejected by the Assessing Officer. In the regular assessment completed under Section 143(3), the Assessing Officer once again confirmed that chargeable profit under Section 115J of the Act comes to Rs. 8,05,696 and not Rs. 2,90,079 as claimed by the assessee.
4.2 THE CIT (Appeals) has dealt with this point in para 6 to 6.4 and has confirmed the computation of book profit under Section 115J as determined by the Assessing Officer.
4.3 THE learned counsel for the assessee submitted that on a plain reading of the relevant provisions contained in Section 115J the computation of book profit as made by the assessee deserves to be accepted. He invited our attention towards a chart giving details of past losses and unabsorbed depreciation, which is reproduced hereunder :
THE assessee claimed set off in respect of deficiencies of past years to the tune of Rs. 19,02,623 (Rs. 21,34,688 minus profit for assessment year 1989-90 Rs. 2,32,065). THE learned counsel submitted that Section 115J is a deeming provision whereby the "total income" of an assessee is deemed to be an amount equal to 30 per cent of the book profits if the total income, as computed under the provisions of I.T. Act is less than 30 per cent of such book profit. Since it is a deeming provision the relevant clauses contained in the said section have to be construed strictly. It was submitted that on a true and correct interpretation of Clause [iv) of the Explanation to Section 115J(1), the losses suffered by the company in any of the years since the year 1960 will be eligible to be set off against the profit of the relevant previous year regardless of the fact that there was a profit in one or more of the intervening year or years from the year in which the loss or depreciation remained unabsorbed and the year in which the set off against the profits of the relevant year in which the assessee chooses to set off the past loss. On that basis he submitted that the losses of the years 1983, 1986 and 1987 will be eligible to be set off against the income of assessment year 1990-91 for the purpose of computation of the book profits under Section 115J regardless of the fact that there was positive income of a substantial amount in the intervening years 1984 and 1985. He submitted that provisions of Sub-clause (iv) are materially different as compared to the provisions contained in Section 205(1)(b) of the Companies Act which have been incorporated in Clause (iv) of the Explanation to Section 115J. Section 205(1)(b) of the Companies Act permits set off in respect of past losses either against the profits of the relevant year or of any previous financial year or years or against both. THE company would have the option of set off of the amount of past losses against the profits of the relevant previous year or of any pervious financial year or years as per Section 205(1)(b). Section 115J does not prescribe any priority in the process of set off. It does not provide that the amount required to be set off under Section 205(1)(b) of Companies Act in the first instance be set off against the profits of the prior years or vice versa. According to the learned counsel on a true and correct interpretation of the relevant provisions of Section 115J, it must be held that the amount arrived at under Section 205(1)(b) is required to be set off against the profits of the relevant previous year for purpose of Section 115J in relation to the computation of the profits only of the relevant previous year and not of any prior financial years. If such a view is accepted the working of book profit as made by the assessee would be found to be perfectly in consonance with the plain language of the relevant provisions contained in Section 115J. In order to support his contention the learned counsel relied on an elaborate opinion given by Shri Bansi S. Mehta to one M/s Mahindra Ugine Steel Co. Ltd. submitted in the compilation at pages 36 to 40. He, therefore, submitted that the working of book profit made by the Assessing Officer should be cancelled and that of the assessee should be accepted.
4.4THE learned D.R. submitted that the interpretation sought to be placed by the learned counsel is apparently incorrect and is contrary to the interpretation based on a plain reading of the relevant provisions of law. He relied on the reasons mentioned in the orders of the departmental authorities and urged that the view taken by the CIT(A) should be confirmed.
4.5 We have considered the submissions made by the learned representatives and have given a very thoughtful consideration to the arguments advanced by them. Before we consider the arguments of both sides in relation to interpretation of Sub-clause (iv) of the Explanation to Section 115J(1), it would be relevant to bear in mind the legislative history of introducing the provisions of Section 115J. THE Finance Minister in his Budget Speech for 1987-88, published in , 165 ITR 1 (St.), in para 80, [p. 14 (St.) has stated that it would be fair and proper that the prosperous companies should pay at least some tax. THE phenomenon of so called "zero tax" of highly profitable companies deserves attention. It was, therefore, proposed to introduce a provision whereby every company will have to pay a minimum corporate tax on the profits declared by it in its own accounts. In the Finance Bill as introduced, the provisions of item (iv) of the Explanation to Section 115J did not exist. In other words, for computation of book profits for the purpose of Section 115J there was no provision for deducting past losses or unabsorbed depreciation. THE trade and industry made representations. After considering several representations made in this regard, the Finance Minister while moving the Finance Bill proposed certain amendments in the proposed Section 115J and agreed with the suggestions and thereby the provisions of Section 205 of the Companies Act, 1956 were incorporated in the form of introducing the present Clause (iv) of the Explanation to Section 115J providing that past losses or unabsorbed depreciation, whichever is less, should be allowed to be set off against the book profit of the current year for purpose of computing book profits in accordance with Section 115J.
4.6 THE provisions of Section 115J requires the assessing authority to first determine the income of the company under the provisions of the IT Act. THEreafter the book profit is to be worked out in accordance with the Explanation to Section 115J(1) and it is to be seen whether the income determined under the first process is less than 30% of the book profit. Section 115J would be invoked if the income determined in the first process is less than 30% of the book profit. THE Explanation to Sub-section (1) of Section 115J gives the definition of 'book profit' by incorporating the requirement of Section 205 of the Companies Act in the computation of the book profit. Accordingly brought forward loss or unabsorbed depreciation, whichever is less, would be reduced in computing the amount of book profit as per the said provisions contained in Section 115J. Thus for the purpose of Section 115J, book profits will be the net profit as shown in the P & L account prepared in accordance with the provisions of Schedule VI to the Companies Act, 1956 after certain adjustments. THE net profit so computed according to Schedule VI of the Companies Act, will be increased or reduced by various amounts enumerated in various clauses of the Explanation to Section 115J(1).
4.7 It will be necessary to reproduce Clause (iv) of Explanation to Section 115J(1), which is the subject-matter of interpretation in relation to the present case. It is provided in the explanation that book profit means the profit as shown in the P & L a/c for the relevant previous year prepared as per Schedule VI of the Companies Act and the same shall, inter alia, be reduced by :
(iv) the amount of the loss or the amount of depreciation which would be required to be set off against the profit of the relevant previous year as if the provisions of Clause (b) of the first proviso to Sub-section (1) of Section 205 of the Companies Act, 1956(1 of 1956), are applicable.
THE learned counsel for the assessee submitted that the unabsorbed loss or unabsorbed depreciation of prior years is required to be set off against the profit of the relevant previous year i.e., the year under consideration, regardless of the fact that in some intervening year there was a positive income as per the book of account. Such an interpretation as canvassed by the learned counsel would defeat the very purpose and object with which the provisions of Section 115J were introduced with a view to ensure that 'zero tax' prosperous companies pay minimum corporate tax as per the provisions of Section 115j. Such an interpretation as suggested by the learned counsel is also not validly possible even on the basis of a plain reading of the relevant Clause (iv). It will be worthwhile repeating that the said Clause (iv) clearly provides that the amount of the loss or the amount of depreciation which would be required to be set off against the profit of the relevant previous year as if the provisions of Section 205 of the Companies Act, 1956 are applicable. THE use of words "which would be required to be set off in the said clause clearly means that only that amount of loss or depreciation which has not already been set off against the past profits, can be regarded as the eligible amount which would be required to be set off against the profits of the relevant previous year. THE said expression "which would be required to be set off, therefore, clearly excludes the amount which has already been set off in prior years and did not remain unabsorbed loss or unabsorbed depreciation in the relevant previous year for which the book profits is to be computed as per the provisions of Section 115J. We, therefore, do not find any merit in the contention of the learned counsel. THE computation of book profit as made by the assessee for the purpose of Section 115J is patently wrong and is not in conformity with the interpretation of the relevant Clause (iv) based on plain reading of the said clause. THE ground so taken by the assessee, therefore, has no merit and is dismissed.
4.8 It will be worthwhile to add that the CIT(A) in para 6.4 has observed that the Assessing Officer has calculated the deficiency of earlier years as per books at Rs. 3,93,898 for the purpose of computing book profits under Section 115J. THE quantum of such deficiency of earlier year computed by the department was not contested by the learned counsel, before the CIT(A) in any of the submissions made before him nor before us. He also admitted before us that the addition of Rs. 2,10,000 on account of income-tax provision made by the AO while computing the book profit under Section 115J is correct and omission to include the same in the working given by the assessee was an inadvertent mistake. In view of the said facts, the computation of book profits as made by the AO under Section 115J is held to be correct.;