Book-profit computation under MAT cannot ignore audited accounts or deny depreciation on revalued assets absent express statutory adjustment.

For book-profit computation under the MAT provisions, audited accounts prepared under the Companies Act cannot be reopened by the Assessing Officer except to the limited adjustments expressly permitted by statute. A qualification in the auditor's report about selective revaluation did not make the accounts unaudited or justify denial of depreciation on revalued assets. Applying Apollo Tyres, the Gujarat High Court noted that depreciation on revalued assets could not be excluded merely on that basis, and the Tribunal's contrary view was set aside in favour of the assessee.

---

---

Issues: Whether depreciation relatable to the enhanced value of revalued assets could be excluded while computing book profit for the assessment year 2004-05, merely because the auditor's report contained a qualification note regarding selective revaluation.

Analysis: The audited accounts were prepared under the Companies Act, 1956 and the statutory scheme for computing book profit under sections 115J, 115JA and 115JB of the Income-tax Act, 1961 does not permit the Assessing Officer to go behind the net profit shown in the profit and loss account except to the limited extent expressly authorised by the statute. The note in the audit report about selective revaluation did not justify treating the accounts as unaudited or unauthenticated. The earlier view against the assessee was distinguished because the present year involved a qualified audit report, but the Court held that the qualification did not authorise recomputation of book profit by denying depreciation on revalued assets. The principle in Apollo Tyres was applied to hold that once the accounts are audited in accordance with the Companies Act, the Assessing Officer cannot make a fresh inquiry into the entries for book-profit computation.

Conclusion: The issue was decided in favour of the assessee. Depreciation on the revalued assets could not be disallowed for computing book profit, and the Tribunal's contrary view was set aside.

Ratio Decidendi: For computation of book profit under the MAT provisions, the Assessing Officer cannot disregard audited accounts prepared under the Companies Act or exclude depreciation on revalued assets unless such adjustment is expressly permitted by the statutory explanation.

---