Unverified Land Impairment Claims and MAT Implications: ITAT Rajkot Upholds Revisional Jurisdiction in Digjam Limited Case

The intersection of corporate accounting standards and the Minimum Alternate Tax (MAT) framework often creates complex interpretational challenges, particularly concerning asset impairment and write-offs. In a significant judicial pronouncement, the Income Tax Appellate Tribunal (ITAT), Rajkot Bench, delivered its judgment in the case of Digjam Limited Vs PCIT (I.T.A. No. 349/Rjt/2025), dated 12/10/2026. The Tribunal affirmed the revisional order passed by the Principal Commissioner of Income Tax (PCIT), emphasizing that while an actual write-off may theoretically escape MAT add-backs, the underlying accounting entries, valuation methodologies, and factual matrices must be rigorously examined by the assessing authorities.

This comprehensive analysis delves into the factual background, the core legal arguments surrounding Section 115JB and Section 263 of the Income Tax Act 1961, the judicial precedents cited, and the critical takeaways for corporate assessees navigating asset impairment claims.

Factual Matrix of the Dispute

The dispute originated from the income tax return filed by the assessee company for the Assessment Year (AY) 2021-22.

  1. Filing of Return: On 17.02.2022, the assessee submitted its return of income, declaring a 'Nil' total income under the normal provisions of the Income Tax Act 1961, while simultaneously reporting its book profit computed under Section 115JB.
  2. Initial Assessment: The National Faceless Assessment Centre (NFAC), Delhi, scrutinized the return and finalized the assessment under Section 143(3) read with Section 144B on 26.12.2022. The assessing authority accepted the returned income without making any adjustments regarding the impairment of assets.
  3. Invocation of Revisional Powers: Subsequently, the administrative PCIT reviewed the assessment records and identified a significant anomaly. The assessee had recorded an impairment loss concerning its land holdings amounting to ₹4,611.27 lakh (approximately ₹46.11 crore).
  4. Issuance of Notice: The PCIT observed that this substantial capital expenditure had neither been disallowed during the computation of regular business income nor added back to the book profits under Section 115JB. Consequently, a show-cause notice under Section 263 was issued on 13.03.2025, proposing to revise the assessment order on the grounds that it was both erroneous and prejudicial to the interests of the Revenue.
  5. Revisional Order: After considering the submissions, the PCIT passed an order on 28.03.2025, setting aside the original assessment order to the limited extent of these specific issues and directing the Assessing Officer (AO) to reframe the assessment after conducting proper inquiries.