TaxTMI 
TaxTMI 
2008 (9) TMI 446
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....he addition in the sum of Rs. 15,03,991, being the amount of provision for depreciation for earlier years written back in its accounts for the year by the assessee on the basis of it having been charged to the revenue in excess (for those years), to the amount of "book profit", in computing its tax liability under s. 115JB of the IT Act, 1961 ('the Act' hereinafter), is correct in law or not. 4. Opening his arguments on the Revenue's behalf, it was contended by the learned Departmental Representative that the basis for the AO's action in the matter was that the depreciation for the relevant years, being the previous years relevant to asst. yrs. 1997-98 to 2000-01, stood provided for, so that the profit for those years stood deflated or depressed to that extent. As such, the treatment as made by the AO is clearly in terms of the relevant section, i.e., Expln. 1 to s. 115JB. 5. The learned Authorised Representative, on the other hand, submitted that the relief allowed to the assessee in its case is strictly only on the basis of the relevant provision, i.e., s. 115JB. The accounting policy in respect of the provision for depreciation on its fixed assets stood changed by the assessee....
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....an earlier year, would be allowed to be reduced from the book profit for the current year, being credited to the P&L a/c, only if the relevant reserve or provision stood either created or made for any assessment year commencing before 1st April, 1988, or, being for a subsequent. year, the said reserve or provision had gone to increase the book profit of any year when the provision of the section is applicable. This was so done, it stands explained therein, as the companies, in order to take benefit of the said provision of law, withdrew the amounts from the reserves created or the provisions made in the same year itself. As such, the law stood amended by Finance Act, 1989 w.e.f. asst. yr. 1988-89. In the present case, for each of the four years, the corresponding provision being applicable from the asst. yrs. 1997-98 to 2001-02, the MAT provision (s. 115JB) being applicable, the restriction placed by the said proviso would not apply. As such, the check provided by the legislature, i.e., to avoid such a malpractice was not applicable in the instant case; the profits being already assessed under the regular provisions of the Act, even as s. 115JB was applicable. As such, the reductio....
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.... learned Authorised Representative with retrospective effect from CBDT Circular No. 550, dt. 1st Jan., 1990 in relation to the extant provision, i.e., s. 115J, is apposite. The legislature, concerned over the misuse of the reduction granted by the statute qua the artificial increase in the profit for the year (so that it ought to be reasonably reduced) on account of withdrawals from reserves or provisions created or made in the earlier years, provided for a qualification, i.e., that the amount withdrawn, and which is sought to be reduced in the computation of book profit, the sum taxable under the MAT provision, would only be where the said amount had gone to increase the profit for the relevant year(s). The provision is aptly clear, and we find no ambiguity therein. Unless it is shown that the provision written back, reduction in respect of which, in the computation of book profit, is being sought under Expln. 1 to s. 115JB, having been credited to the P&L a/c for the year, had, in fact, gone to increase the 'book profit' for the relevant year, the said reduction would not be allowed. The interpretation placed by the CBDT, while explaining the amendment to the Act per the Amending....
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....he write back being a subterfuge or not representing the excess provision, having been, as stated, worked out with reference to the changed method of accounting with respect to depreciation and, therefore, though not non-suiting the assessee's claim, i.e., at the threshold, however, would not operate to circumvent the satisfaction of the basic qualifying condition for the application of the provision. We are, at the same time, also conscious of the fact that the legislature has specifically provided for the reduction of the amount of withdrawal made out of the provision(s) (which, as aforesaid, by definition, only go to reduce the profits for the relevant year), so that they cannot go to increase the same, as in the case of, or in contradistinction to, the reserves, i.e., treated the two at par. The only meaningful way to harmonize this apparent anomaly is to increase the book profit of the relevant year(s); the provision of s. 115JB (or even s. 115JA) being applicable, by the amount of write back. To the extent the same does not lead to invocation of s. 115JB (s. 115JA), the amount written back can be validly reduced from the current year's profit. the balance not, as it would, if....