2019 (8) TMI 1114 - AT - Income Tax

B ook profit adjustment u/s. 115JB - difference in depreciation - exclusion of amount credited in P/L account under the head Earlier years adjustment- Difference in depreciation provision while determining book profit - HELD THAT - Identical issue considered in the case of ACIT Vs. Srinivas Synthetics Packers (P) Ltd. 2008 (9) TMI 446 - ITAT AGRA . The ITAT after careful analyzing found that the entire amount written back can be claimed as a reduction under the proviso to clause (i) of Explanation (1). No contrary decision has been shown. Hence we affirm the order of learned CIT(A). - Decided against revenue

Summary

Issues:
- Disallowance of amount towards difference in depreciation for computing book profit u/s 115JB of the IT Act

Analysis:
1. The Assessing Officer disallowed an amount credited under "Earlier years adjustment - Difference in depreciation provision" in the P&L account. The assessee calculated the difference in depreciation for AYs 2001-02 to 2010-11 and credited it to the P&L account, reducing it from the total profit while computing book profit u/s 115JB. The AO contended that such reduction is not permissible under the IT Act provisions.

2. The CIT(A) noted the assessee's submission regarding the change in depreciation method as per Accounting Standard-6 (AS-6) issued by ICAI. The assessee reported the change in the depreciation method in the annual accounts, duly approved by the Board of Directors and shareholders. The CIT(A) agreed with the assessee's contention, citing the decision in ACIT v/s Srinivas Synthetics Packers P Limited, where it was held that the reduction in book profit due to depreciation write-back can be allowed under Explanation 1 to section 115JB.

3. The CIT(A) concluded that the depreciation write-back was in line with the Companies Act and AS-6, and the treatment was as per ICAI's Guidance Note. Referring to the decision in Srinivas Synthetic Packers case, the CIT(A) directed the deletion of the disallowed amount from the book profit determination under section 115JB. The AO was instructed to verify and modify the figures for AYs 2001-02 to 2010-11 accordingly.

4. The Revenue appealed against the CIT(A)'s order, arguing that the Assessing Officer's decision should be upheld. However, the ITAT upheld the CIT(A)'s order, citing the decision in ACIT Vs. Srinivas Synthetics Packers (P) Ltd., where it was held that the entire amount written back can be claimed as a reduction under the proviso to clause (i) of Explanation (1).

5. The ITAT affirmed the CIT(A)'s order, dismissing the Revenue's appeal. The judgment was pronounced on 23.7.2019.