CIT Vs. RANBAXY LABORATORIES LTD.

JUDGEMENT

(1.) REVENUE in this appeal under section 260A of the Income Tax Act, 1961 ("Act"), which pertains to the assessment year 1989 -90, has raised the following questions of law which arise out of the order passed by the Tribunal dt. 5 -11 -1999 :

(2.) THE respondent is a limited company engaged in business of manufacture and sale of drugs etc. For the assessment year 1989 -90, the respondent had filed a return of loss of Rs. 4,26,57,272 under the normal provisions but as the total income was less than 30 per cent of its book profits, taxable income was computed and declared under section 115J at Rs. 1,07,45,880, which was 30 per cent of the book profits.

(3.) COMMISSIONER (Appeals), rejected the reasoning given by the assessing officer and the addition was deleted. He held that the action of the respondent provided for the earlier errors to make -up the deficiency and this was permissible and not contrary to the provisions of the Companies Act. Further, Parts II and III of the Sch. VI of the Companies Act stipulate and accept that method of computing depreciation could be different from the method described in the Act i.e. the Income Tax Act. The rates prescribed in the Companies Act were the minimum rates. This did not bar an assessee from claiming a higher rate of depreciation. Reference was made to instructions issued by the ICAI, that if there had been understatement of depreciation, the auditor should quantify the same and bring it to the notice of the shareholders as they must know the impact and effect on the net profit.