TaxTMI 
TaxTMI 
2011 (4) TMI 1037
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.... method of providing depreciation retrospectively? 2. Whether, on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in law in upholding the order of the CIT(A) directing not to charge interest u/s 234-B and 234-C of the Act since the total income was determined under section 115-J of the Act? 3. The assessment year is 1989-90 and the relevant accounting period is the year ended on 31st March, 1989 (15 months). The Assessing Officer computed the total income of the assessee company under section 143(3) of the Act at Rs.2,92,880/- after adjusting brought forward losses and unabsorbed depreciation vide assessment order dated 24th February, 1992. The Assessing Officer separately computed the taxable profit of the Company under section 115J of the Act according to which, the chargeable profit under section 115J came to Rs.11,11,550/-. The Assessing Officer negatived the assessee's claim for additional provision of depreciation to the extent of Rs.20,77,946/-. According to the assessee, it had changed the method of providing depreciation from Straight Line Method (SLM) to Written Down Value (WDV) Method which has resulted in a....
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....dispute. In the present case, the Assessing Officer had made the addition in question on the ground that the assessee could not claim depreciation which was not provided for in the books of accounts of the assessee for the earlier years. However, as noticed hereinabove, the assessee in the present case had changed the method of providing depreciation from Straight Line Method to Written Down Value Method and the resultant shortfall in depreciation was charged to the Profit and Loss Account for the current year. Both the Commissioner (Appeals) as well as the Tribunal have taken note of the fact that the assessee's change of method in accounting from Straight Line Method to Written Down Value method was in accordance with the accounting standards issued by the Institute of Chartered Accountants. The Tribunal, accordingly, held that the disallowance made by the Assessing Officer was not warranted by the provisions of the Companies Act or by the provisions of section 115J of the Act as there was no bar for a change in the method of accounting standards recognised for the purpose of the Companies Act. 7. It is not in dispute that the short fall in the depreciation, was charged....
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....y involved in the present case and as such the same stands concluded in favour of the assessee by the decision rendered in the said case. 9. In the circumstances, for the reasons stated in the decision of this Court in the case of Commissioner of Income-Tax vs. Rubamin (P) Ltd. (supra), the question is answered in the affirmative, that is, on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in law in upholding the deletion of addition of Rs.20,77,946/- made by the Assessing Officer to the book profit on account of additional depreciation debited in the books for the earlier years because of change in the method of providing depreciation retrospectively. 10. Insofar as the second question which relates to charging of interest under sections 234B and 234C is concerned, Mr. M.J. Shah, learned advocate for the respondent invited attention to the decision of the Supreme Court in the case of Commissioner of Income-Tax vs. Kwality Biscuits Ltd., (2006) 284 ITR 434 (S.C.) wherein the Supreme Court has confirmed the decision of the Karnataka High Court in Kwality Biscuits Ltd. vs. CIT, (2000) 243 ITR 519. It was submitted that t....
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....e profit and loss account has to be prepared in accordance with the provisions of Parts II and III of Schedule VI to the Companies Act. In the Explanation under section 115J(1A) it is provided that for the purposes of this section "book profit" means the net profit as shown in the profit and loss account for the relevant previous year prepared under sub-section (1A) as increased by various amounts given in the section. Thus, for the purpose of assessing tax under section 115J, firstly, the profit as computed under the Income-tax Act has to be prepared and thereafter the book profit as contemplated by the provisions of section 115J are to be determined and then the tax is to be levied. The liability of the assessee for payment of tax under section 115J arises if the total income as computed under the provisions of the Act is less than 30 per cent of its book profits. This exercise for determining the total income in accordance with the provisions of the Act and that of book profit can be only after the end of the relevant assessment year. It is only the deemed income for which the provisions of section 115J have been incorporated. When a deeming fiction is brought under the statute ....