Deputy Commissioner of Income Tax vs Surat Textile Mills Ltd.

D.A. Mehta, J.—At the time of admission on July 9, 2007, the following substantial question of law came to be framed by the High Court:

Whether the Appellate Tribunal is right in law and on facts in setting aside the assessment order on the issue of book profit worked out under 115J as also in directing the Assessing Officer to work out the book profit u/s 115J by allowing depreciation under written down value method?

The assessment year in question is 1989-90, the relevant accounting period being year ended oh March 31, 1989 (comprised of 15 months). The assessee, a limited company, filed return of income and claimed depreciation by adopting the written down value method. The same was disallowed by the Assessing Officer and straight line method was adopted on the basis of accounts which were adopted by the general body of assessee-company at the annual general meeting. This exercise was undertaken by the Assessing Officer while computing the figure of book profit under the provisions of Section 115J of the Income Tax Act, 1961 (the Act). Except for referring to the object with which the provisions of Section 115J of the Act were brought on the statute book, no other reason has been advanced by the Assessing Officer for discarding the accounts on the basis of which depreciation has been claimed by adopting the written down value method.

The assessee carried the matter in appeal before the Commissioner (Appeals) and succeeded. The Revenue failed in its appeal before the Tribunal for the reasons recorded in the impugned order dated March 16, 1999.

Learned Counsel for the appellant-Revenue has reiterated the submissions made in another tax appeal heard today, in the case of Deputy Commissioner of Income Tax (Assessment) Vs. Arvind Mills Ltd., to submit that for the purposes of Section 115J of the Act book profit has to be computed in accordance with the profit and loss account, which is authenticated by the chartered accountant and presented and approved by the general body of the company at the annual general meeting. Any other set of accounts, according to learned counsel, cannot be permitted to be used as a basis for computing the book profit u/s 115J of the Act.

On behalf of the respondent-assessee learned advocate also placed reliance on the submissions made on behalf of respective assessee in Tax Appeal No. 236 of 1999 to submit that no interference was warranted in the impugned order of the Tribunal.

In the facts of the present case, the Commissioner (Appeals) has admittedly found, as a matter of fact, that the profit and loss account presented, along with the return of income was in terms in consonance with Parts II and III of Schedule VI to the Companies Act, 1956, and the same was duly audited by a chartered accountant. The Tribunal has confirmed the order made by the Commissioner (Appeals) and there is nothing on record to disprove the aforesaid finding of fact recorded by the Commissioner (Appeals).

In the circumstances, for the reasons recorded in the judgment of even date rendered in case of Deputy Commissioner of Income Tax (Assessment) Vs. Arvind Mills Ltd., no infirmity can be found in the impugned order of the Tribunal. The question is accordingly answered in the affirmative, i.e., in favour of the assessee and against the Revenue.

The appeal is accordingly dismissed with no order as to costs.