2013 (12) TMI 1415 - HC - Income Tax

Depreciation for the purposes of section 115JA - Held that - Following Apollo Tyres Ltd Vs. CIT 2002 (5) TMI 5 - SUPREME Court - Company as well as Registrar of Companies is obliged to satisfy that the accounts of the company are maintained in accordance with the requirements of the Companies Act - The book profits u/s 115JA, depreciation shall be computed on the same method and rates, which have been adopted for calculating the depreciation for the purpose of preparing the profit and loss account laid before the company at its Annual General Meeting in accordance with the provisions of Section 210 of the Companies Act, 1956 - The department did not bring anything on record, which could have established that the accounts of the company were not maintained in accordance with the requirements of the Companies Act - Decided against Revenue.

Summary

Issues:
1. Interpretation of depreciation calculation under Section 115-JA of the Income Tax Act, 1961.
2. Compliance with the Companies Act, 1956 in relation to profit and loss account preparation.

Issue 1: Interpretation of Depreciation Calculation under Section 115-JA:
The judgment pertains to an Income Tax Appeal challenging the order of the Income Tax Appellate Tribunal regarding the assessment year 1997-98. The primary question of law raised was whether the depreciation calculation for book profits under Section 115-JA satisfied the requirements of the Companies Act. The first proviso to sub-section (2) of Section 115-JA mandates that depreciation should be computed using the same method and rates as adopted for the profit and loss account presented at the Annual General Meeting, in accordance with Section 210 of the Companies Act, 1956. The Tribunal confirmed that the depreciation method used for book profits was consistent with the method employed for the profit and loss account, meeting the statutory requirements.

Issue 2: Compliance with Companies Act, 1956 for Profit and Loss Account Preparation:
The judgment references the case of Apollo Tyres Ltd vs. CIT [255 ITR 273], where the Supreme Court emphasized the obligation of companies and the Registrar of Companies to ensure compliance with the Companies Act regarding account maintenance. In the present case, the Tribunal observed that there was no evidence provided by the department to demonstrate any non-compliance with the Companies Act in maintaining the company's accounts. Consequently, the Tribunal ruled in favor of the assessee, dismissing the Income Tax Appeal.

In conclusion, the High Court upheld the Tribunal's decision, emphasizing that the depreciation calculation for book profits under Section 115-JA aligned with the Companies Act requirements. The judgment highlights the importance of adherence to statutory provisions in financial reporting and affirms the Tribunal's findings in favor of the assessee.