2013 (9) TMI 1057 - HC - Income Tax

Addition made to the book profit on account of alleged arrear depreciation for the purpose of computing the profit u/s 115J - Held that - Learned counsel appearing for the respondent submits that they have no objection in case the assessing officer carries out the necessary verification and examines whether additional depreciation of 126.18 lacs was on account of change in method of calculation of depreciation or had arisen on account of the fact that it pertained to earlier period but has been claimed in this year for some other reason other than the change in method of calculation of depreciation. Statement made by the counsel for the respondent is taken on record. We clarify that in case this difference has arisen on account of change of method of calculation of depreciation the assessing officer will not touch and go into any other aspect. This answers question No.(i) which has to be answered against the revenue and in favour of the respondent assessee Addition being expenditure incurred on rural development programmes treating them as advertisement and publicity expenses - Held that - In the absence of full facts and failure of the appellant to place relevant orders on record we cannot answer the question and the same is left unanswered for want of details and proper prosecution. Debenture issue expenses on issue of convertible debentures - Held that - Third question referred to above is covered by the judgment of the Delhi High Court in CIT vs. Havells India Limited; 2012 (5) TMI 449 - DELHI HIGH COURT

Summary

Issues involved:
1. Whether the ITAT was correct in upholding the deletion of addition made to the book profit on account of alleged arrear depreciation for computing profit u/s 115J of the Income Tax Act?
2. Whether the ITAT was correct in deleting the addition of Rs. 2,84,892 being expenditure incurred on rural development programs treated as advertisement and publicity expenses?
3. Whether the ITAT was legally correct in allowing debenture issue expenses of Rs. 38,28,900 on the issue of convertible debentures?

Issue 1:
The respondent, a limited company, filed a return of loss for the assessment year 1989-90 but declared taxable income under Section 115J at Rs. 1,07,45,880, which was 30% of the book profits. The assessing officer disallowed additional depreciation claimed due to a change in the method of computing depreciation. However, the CIT(A) held that the adjustment was permissible as per the Companies Act. The Tribunal affirmed this decision citing various judgments. The court referenced the decision in Apollo Tyres Ltd. v. Commissioner of Income Tax, stating that the assessing officer's power is limited to examining certified accounts under the Companies Act. The court upheld the CIT(A)'s decision, ruling in favor of the respondent.

Issue 2:
Regarding the second question, the court found a lack of relevant facts on record to provide a conclusive answer. The assessing officer's order lacked details, and the Tribunal had relied on earlier orders. The respondent had engaged in a rural development program that was treated as advertisement and publicity expenses. However, without sufficient factual assertions or details, the court could not determine the outcome of this issue.

Issue 3:
The third question was resolved based on a judgment of the Delhi High Court in CIT vs. Havells India Limited, following precedents from India Cements Ltd. v. Commissioner of Income Tax and Commissioner of Income Tax v. Secure Meters Ltd. The court ruled in favor of the assessee and against the revenue, answering question no. (iii) in favor of the assessee.

In conclusion, the court disposed of the appeal without costs, with a detailed analysis provided for each issue raised in the appeal under Section 260A of the Income Tax Act, 1961 for the assessment year 1989-90.