Allahabad H.C : The assessee has charged depreciation on the revaluation amounts on assets as per guidance note on treatment of reserve created on revaluation of fixed assets issued by the ICAI whereas the applicability of the provisions of s. 115J of the IT Act, 1961, and cl. 7(2) of Part III of Sch. VI to Companies Act is attracted as to ascertain book profit after deducting the amount of depreciation in view of Circular No. 495, dt. 22nd Sept., 1987 of the CBDT reported in (1988) 67 CTR (St.) 1 : (1987) 168 ITR (St.) 87, 110 and Expln. (b) to s. 115J(1) of the IT Act

High Court Of Allahabad

CIT vs. Amrit Banaspati Co. Ltd.

Section 115J

Asst. Year 1990-91

R.K. Agrawal & S.K. Gupta, JJ.

IT Appeal No. 61 of 2000

14th July, 2009

Counsel Appeared :

A.N. Mahajan, for the Revenue : S.D. Singh, for the Assessee

JUDGMENT

By the court :

The present IT appeal filed under s. 260A of the IT Act, 1961 (hereinafter referred to as “the Act”), has been admitted on the following sole substantial question of law arising out of the Tribunal’s order dt. 30th Dec., 1999 :

“Whether, on the facts and in the circumstances of the case, the learned Tribunal was legally justified in holding that the assessee has charged depreciation on the revaluation amounts on assets as per guidance note on treatment of reserve created on revaluation of fixed assets issued by the ICAI whereas the applicability of the provisions of s. 115J of the IT Act, 1961, and cl. 7(2) of Part III of Sch. VI to Companies Act is attracted as to ascertain book profit after deducting the amount of depreciation in view of Circular No. 495, dt. 22nd Sept., 1987 of the CBDT reported in (1988) 67 CTR (St.) 1 : (1987) 168 ITR (St.) 87, 110 and Expln. (b) to s. 115J(1) of the IT Act ?”

2. Briefly stated the facts in a nutshell are as follows : The revaluation of the land and building was done by the valuer in the financial year 1984-85 raising the cost of land by Rs. 4,12,08,935 and that of the building by Rs. 2,73,88,274. The excess depreciation charged to the P&L a/c due to such revaluation comes to Rs. 9,95,569 for the relevant year 1990-91. The assessing authority by assessment order dt. 30th Nov., 1992, added this depreciation of Rs. 9,95,569 to the book profit in order to work out the assessee’s income liable to tax within the meaning of s. 115J of the Act.

3. The order of the assessing authority was confirmed by the CIT(A), Muzzafarnagar by order dt. 16th June, 1993. The said order increasing the book profit to the extent of Rs. 9,95,569 on depreciation was set aside by the Tribunal in favour of the assessee. Hence, the present appeal by the Revenue.

4. Heard Sri A.N. Mahajan, learned standing counsel for the Department and Sri S.D. Singh, learned counsel for the respondent.

5. The only issue relates to the allowability of depreciation of Rs. 9,95,569 being the difference in the depreciation between the revalued amount of the building and the depreciation chargeable on the actual cost.

6. That as per the provisions of s. 115J of the Act the profit shown in the P&L a/c should be in accordance with Parts II and III of Sch. VI to the Companies Act subject to the Explanation provided thereto.

7. In the year under consideration for the purpose of computing the book profit, the AO disallowed the depreciation of Rs. 9,95,569 being the difference in depreciation between the revaluation amount of the building and the depreciation chargeable on actual cost.

8. In Apollo Tyres Ltd. vs. CIT (2002) 174 CTR (SC) 521 : (2002) 255 ITR 273 (SC), the Supreme Court held that while computing the income under s. 115J, the AO has only the power of examining whether the books of account are certified by the authorities under the Companies Act, as having been maintained in accordance with the said Act. The AO thereafter has the limited power of making increase and reductions as provided for in the Explanation to s. 115J and does not have the jurisdiction to go behind the net profit shown in the P&L a/c.

9. The aforesaid decision of the apex Court has been subsequently followed in Malayala Manorama Co. Ltd. vs. CIT (2008) 216 CTR (SC) 102 : (2008) 6 DTR (SC) 1 : (2008) 300 ITR 251 (SC), wherein it has been held that while computing the income of the company under s. 115J of the Act the AO does not have jurisdiction to go behind the net profit shown in the P&L a/c except to the extent provided in the Explanation to s. 115J of the Act.

10. The Tribunal in para 22 of the judgment while allowing the appeal of the assessee has observed as follows : “It is stipulated in Part III of Sch. VI to the Companies Act that depreciation debited to the P&L a/c could be considered to be in the nature of reserve only when the amount written or retained by way of providing for depreciation, renewals or diminution in value of such assets is in excess of the amount, which in the opinion of the directors is reasonably necessary for the purpose. Admittedly, depreciation debited on the revalued figure of assets was not found to be excessive by the directors. The provision was made in conformity with the said accounting norms. Therefore, in our opinion, the AO was not correct in increasing the book profit to the extent of depreciation attributable to the revaluation of the assets. Accordingly, we decide this issue in favour of the assessee and against the Revenue.”

11. The Tribunal while deciding the issue has given convincing, cogent and satisfactory reasons upon appreciation of evidence and material available in record. We cannot substitute our opinion for that of the Tribunal unless it is found that the conclusion drawn by the Tribunal is based on incorrect facts or irrelevant or impermissible by law. It is not disputed that the books of account are duly certified by the authorities under the Companies Act and P&L a/c has been properly maintained in accordance with Parts II and III of Sch. VI to the Companies Act, 1956. Depreciation was claimed on the revaluation amount and such depreciation in the opinion of the directors was not excessive or unreasonable. We do not find any illegality or infirmity in the order of the Tribunal.

12. In view of the aforesaid discussion this appeal is accordingly dismissed.

[Citation : 320 ITR 399]

Scroll to Top
Malcare WordPress Security