M/s. Sono Medical Centre (P) Ltd. vs Commissioner of Income Tax

This is a reference made at the instance of the assessee u/s 256(1) of the Income Tax Act by the Tribunal to answer the following questions of law by this Court:-

"1. Whether on the facts and circumstances of the case, the Tribunal has erred in not allowing set off of brought forward depreciation for assessment year 1988-89 claimed at Rs. 1,73,417 for working of book profit u/s 115(J) of the Income Tax Act, 1961?

Whether on the facts and circumstances of the case the Tribunal has rightly held that as per provision of clause (iv) of the explanation to section 115(J)(1A) the brought forward depreciation of Rs. 1,73,417 was not allowable while computing the book profit u/s 115(J) since there was profit of Rs. 65,562 before depreciation for A.Y. 1988-89?

Whether on the facts and circumstances of the case the Hon''ble Tribunal has rightly held that the ratio of judgment of M.P. High Court in the case of M/s. Kedia Leather & Liquor (P) Ltd., Indore, is not applicable to the facts of this case and the brought forward depreciation of Rs. 1,73,417 is not allowable?

None for the assessee despite service effected on them. Heard Shri R.L. Jain, learned counsel for the revenue.

At the outset, we may take note of the fact that the question referred to this court for answer was subject matter of discussion before their Lordship of Supreme Court in the case of Surana Steel v. D.C.I.T. (237 ITR 778). It is in this case, their Lordships examined the entire scheme of section 115J in the context of Companies Act and in particular examined the scope of clause 4 of explanation appended to section 115J. Their Lordships then interpreted the word "loss includes depreciation" while computing the book profit of the assessee, whose cases are required to be assessed u/s 115J (since repealed). Their Lordships answered the reference in favour of the revenue and against the assessee.

In our opinion once the law is settled by the authoritative pronouncement of the Supreme Court, nothing remains for this court to decide except to follow the law laid down by the highest court in the country by virtue of article 141 of the Constitution of India. It is for this reason we do not wish to burden our judgment by narrating the entire facts and having bearing over the question referred to this court for answer.

Accordingly and in view of the law laid down by the Supreme Court in the case of Surana Steel (supra) we answer the question in favour of the revenue and against the assessee. As a consequence the consequential orders if required may be passed by the assessing officer in light of the law laid down by the Supreme Court in the case of Surana Steel (supra) in this case after affording an opportunity to the assessee. No cost.