COMMISSIONER OF INCOME TAX Vs. RUBAMIN PRIVATE LTD

JUDGEMENT

(1.) AT the instance of the Revenue, following questions have been referred to this Court:-1. Whether, on the facts and in the circumstances of the case, the Income-tax, Appellate Tribunal was right in law in upholding the CIT (A)'s order deleting the addition of Rs. 61,602/- being the difference in the amount of depreciation as a result of changing the method of providing the depreciation from straight line method to written down value method ?

(2.) WHETHER on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in law in upholding the CIT (A)'s order deleting the disallowance of Rs. 9,58,068/- representing the assessee's claim for depreciation as prior period adjustments as a result of the assessee's switch over from straight line method to written down value method for providing depreciation ? the assessee is a Company in which public are not substantially interested. While framing the assessment for the A. Y. 1989-90, the Assessing Officer made addition of two amounts of Rs. 61,602/- and Rs. 9,58,068/- by disallowing depreciation as claimed by the Company, as the Assessing Officer was of the view that the Company should provide depreciation only in accordance with the rates prescribed in the Companies Act and the assessee Company could not have adopted the method of depreciation from Straight Line Method to Written Down Value method. Hearing the appeal by the assessee, CIT (Appeals) accepted the stand of the assessee that for the purposes of Section 115j of the Income Tax Act, 1961 ('the Act' for short) only those adjustments, which are specified in the explanation to the said Section, can be made from the book profits and depreciation not being one of them and further that the accounts of the Company having been prepared in accordance with the Schedule VI to the Companies Act, the Assessing Officer was in error in disallowing the depreciation as claimed by the Company. Such additions as made by the Assessing Officer were thereupon deleted by the CIT (Appeals ). The Revenue approached the Income Tax Appellate Tribunal against the order passed by the CIT (Appeals ). The CIT (Appeals) negatived the stand of the Revenue on this issue by observing that-

(3.) HAVING heard the learned Counsel, Mr. Manish Bhatt for the Revenue, we find that the question is no longer res integra. The Apex Court, in the case of Apollo Tyres Ltd. v. Commissioner of Income-Tax, reported in 255 ITR, 273, held that the Assessing Officer, while computing the book profits of a Company under Section 115j of the Act has only power of examining whether the books of accounts are certified by the authorities under the Companies Act as having been properly maintained in accordance with the Companies Act. The Assessing Officer thereafter has the limited power of making increases and reductions as provided for in the explanation to Section 115j. The Assessing Officer does not have the jurisdiction to go beyond the net profit shown in the Profit and Loss Account except to the limited extent provided in the explanation. It was further observed that while looking into the accounts of the Company, the Assessing Officer has to accept the authenticity of the accounts with reference to the provisions of the Companies Act, which obligate the Company to maintain its accounts in a manner provided by that Act and the same is to be scrutinized and certified by statutory auditors and approved by the Company in general meeting and thereafter to be filed before the Registrar of Companies. It was observed that Sub-section (1a) of Section 115j does not empower the Assessing Officer to embark upon a fresh inquiry in regard to the entries made in the books of account of the company.