Tribunal allows deletion for MAT computation, dismissing Revenue's appeal on depreciation provision.

The Tribunal upheld the Commissioner of Income-tax (Appeals)' decision to allow the deletion of Rs. 15,03,991 from the book profit for computing Minimum Alternate Tax (MAT) liability under section 115JB of the Income Tax Act, 1961. The appeal by the Revenue challenging the excess provision of depreciation written back was dismissed, as the Tribunal found that the amount written back had increased profits for the relevant years, meeting the conditions for reduction as per Explanation 1 to section 115JB. The Tribunal's decision was supported by precedent and accounting principles, affirming the assessee's position in the case.

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Issues Involved:
1. Whether the deletion of the addition of Rs. 15,03,991, being the amount of provision for depreciation for earlier years written back, in computing tax liability u/s 115JB of the IT Act, 1961, is correct in law.

Summary:

Issue 1: Deletion of Addition of Rs. 15,03,991 in Computing Tax Liability u/s 115JB

The appeal by the Revenue challenges the order by the Commissioner of Income-tax (Appeals), Gwalior, which allowed the assessee's claim regarding the excess provision of depreciation written back. The Assessing Officer (AO) had disallowed the claim of Rs. 15,03,991, arguing that the assessee had not included the amount of depreciation written back in the Profit & Loss (P&L) account, thereby reducing the book profit by Rs. 22,66,988, which was not deductible for computing Minimum Alternate Tax (MAT) liability u/s 115JB.

The Revenue's contention was based on the premise that the depreciation for the relevant years (1997-98 to 2000-01) had been provided for, thus deflating the profit for those years. The AO's treatment was claimed to be in line with Explanation 1 to s. 115JB.

The assessee argued that the relief was granted based on s. 115JB. The accounting policy for depreciation on fixed assets was changed from the "written down value" (WDV) method to the "straight line method" (SLM). According to AS-6 issued by the ICAI, the difference in provision for depreciation due to the change in method should be adjusted in the P&L account. The assessee had an excess provision of Rs. 22,66,988, which was written back to the P&L account, with Rs. 15,03,991 relating to the assessment years 1997-98 to 2000-01.

The Tribunal noted that Explanation 1 to s. 115JB allows for a reduction in profit for any amount withdrawn from a reserve or provision created for any year relevant to assessment year commencing on or after 1st April, 1997, provided the book profit of such year had been increased by those reserves or provisions. The Tribunal found that the MAT provision was applicable for the years in question, and the reduction in book profit for the current year due to the write-back of depreciation for preceding years was correctly directed by the CIT(A).

The Tribunal also considered the decision in PSI Data Systems Ltd. vs. Dy. CIT, which supported the reduction of the amount withdrawn from depreciation written back from the book profit for the year.

The Tribunal concluded that the basic condition for the reduction, i.e., the amount written back should have increased the profit for the relevant years, was met. The assessee had shown that the tax for those years was computed under regular provisions, and there was no claim of tax reduction due to the book profit represented by the excess depreciation written back.

The Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s decision to allow the reduction of Rs. 15,03,991 from the book profit for the purpose of computing MAT liability u/s 115JB.

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