2003 (2) TMI 170 - AT - Income Tax

Summary

Issues Involved:
1. Disallowance of depreciation on office building.
2. Treatment of amount received by the assessee-company from the State Government by way of exemption/reduction of sales-tax.
3. Computation of book profits u/s 115JA of the Act.
4. Levy of interest u/s 234B of the Act.

Summary:

1. Disallowance of Depreciation on Office Building:
The assessee's appeal pertains to the disallowance of depreciation on office buildings in Bombay and Delhi. The AO denied the claim on the grounds that the buildings were not registered in the name of the assessee and were taken on a lease agreement, thus not fulfilling the ownership requirement u/s 32 of the Act. The CIT(A) upheld the AO's findings. However, the assessee argued that the issue is covered by the Supreme Court decisions in Mysore Minerals Ltd. vs. CIT and CIT vs. Poddar Cement Ltd. The Tribunal examined the facts and held that the actual transfer of the property took place within the meaning of s. 2(47) of the Act, and the assessee is entitled to depreciation even in the absence of a registered conveyance deed. The ground of appeal raised by the assessee was allowed.

2. Treatment of Amount Received by the Assessee-Company from the State Government by Way of Exemption/Reduction of Sales-Tax:
The Revenue's appeal relates to the treatment of sales-tax exemption received by the assessee. The AO disallowed the claim, treating the amount as income u/s 43B of the Act. The CIT(A) allowed the claim, treating the amount as a capital subsidy. The Tribunal upheld the CIT(A)'s findings, stating that the exemption was a capital receipt intended for promoting industrial development in backward areas and not a trading receipt. The ground of appeal raised by the Revenue was dismissed.

3. Computation of Book Profits u/s 115JA of the Act:
The AO recomputed the book profits by excluding arrears of depreciation charged to the current year's profit, relying on the Kerala High Court decision in Apollo Tyres. The CIT(A) upheld the assessee's computation, following the Supreme Court's reversal of the Kerala High Court decision. The Tribunal upheld the CIT(A)'s findings, stating that the P&L account was prepared in accordance with Parts II and III of Schedule VI of the Companies Act, and the AO does not have the jurisdiction to go behind the net profits shown in the P&L account. The ground of appeal raised by the Revenue was dismissed.

4. Levy of Interest u/s 234B of the Act:
The AO levied interest u/s 234B, which the CIT(A) deleted, stating that no interest is leviable when income is computed under s. 115JA. The Tribunal upheld the CIT(A)'s findings, following various decisions that no interest is chargeable when income is computed under s. 115JA. The ground of appeal raised by the Revenue was dismissed.

Conclusion:
The appeal filed by the assessee was allowed, and all the appeals directed by the Revenue were dismissed.