2000 (6) TMI 19 - HC - Income Tax

Summary

Issues:
1. Interpretation of depreciation rates under section 115J of the Income-tax Act, 1961.
2. Application of Companies Act provisions in computing income under section 115J.
3. Relevance of previous court decisions on similar matters.

Issue 1: Interpretation of Depreciation Rates
The case involved a question of law regarding the correctness of allowing depreciation as per the rate applicable in income tax while computing the assessee's income under section 115J of the Income-tax Act, 1961. The Commissioner of Income-tax (Appeals) directed the Assessing Officer to allow depreciation as per the rate applicable in the Income-tax Rules. The Tribunal upheld this decision, basing it on previous judgments from different High Courts. The Tribunal emphasized that the interpretation of 'loss' and 'depreciation' for declaring dividends under the Companies Act, 1956, was irrelevant in the context of section 115J, and depreciation should be allowed as per the Income-tax Act provisions.

Issue 2: Application of Companies Act Provisions
The crux of the matter was whether the rate of depreciation should be determined based on the provisions of the Companies Act or the Income-tax Act when computing income under section 115J. The Tribunal relied on various court decisions to support the view that the rate of depreciation should align with the Income-tax Act, disregarding the Companies Act provisions. The Tribunal highlighted that once a provision is borrowed from one enactment and incorporated into another, it should be interpreted according to the borrowing enactment, in this case, the Income-tax Act.

Issue 3: Relevance of Previous Court Decisions
The Revenue contended that the decisions of the Commissioner of Income-tax (Appeals) and the Income-tax Appellate Tribunal were not legally tenable. They cited a Supreme Court decision where it was clarified that the term 'loss' in the context of section 115J should be understood after taking into account depreciation. The Supreme Court emphasized that the word 'loss' signifies the amount after considering depreciation, aligning with the objectives of section 115J. Consequently, the Tribunal's decision was deemed incorrect, and the reference was answered in the negative based on the Supreme Court's interpretation.

In conclusion, the judgment clarified the interpretation of depreciation rates under section 115J, emphasized the primacy of the Income-tax Act provisions over the Companies Act in such matters, and underscored the significance of Supreme Court decisions in guiding legal interpretations in tax matters.