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TMI Blog2000 (8) TMI 247X X X X Extracts X X X X X X X X Extracts X X X X ..... ,65,18,620 was debited to the books of account. The Assessing Officer did not allow the claim of the assessee in respect of arrears of depreciation to the extent of Rs. 1,65,18,620. He, therefore, recomputed the book profits as per the provisions of section 115-J at Rs. 44,11,746. Being aggrieved the assessee preferred appeal before the Commissioner of Income-tax (Appeals). It was contended that the Assessing Officer was not justified in determining the book profits. The CIT (Appeals) following the order dated1-7-1992in appeal No. 42/DC(A)/MBD/91-92 for the assessment year 1989-90 allowed the claim of the assessee. Being aggrieved of the order of the CIT (Appeals) the Revenue is in appeal. 4. Shri M.P. Mehrotra, the learned counsel for the assessee, appeared before us. It was vehemently contended that the assessee correctly computed the book profit as per the prescription of section 115-J. It is beyond the powers of the Assessing Officer to tinker the book profits computed in accordance with the provisions of law. The profits were computed in accordance with the provisions of Parts II III of Schedule VI to the Companies Act, 1956. Further it was stated that the arrears of depre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3] 45 ITD 22. It was stated that the profit as shown by the assessee is not sacrosanct. It is open to scrutiny. It is to be seen that whether the assessee has acted in accordance with the parameters, set out in the Companies Act, or not, for computing such book profit. It was further submitted that the assessee debited arrears of depreciation against the current year's profit. 8. Shri Malik vehemently opposed the contention of Shri Mehrotra that arrears of depreciation and unabsorbed depreciation are the same. It was explained that the two things cannot be placed on the same footing. In respect of unabsorbed depreciation the assessee makes provision for the depreciation, but because of the inadequacy of profits when the amount of depreciation remains not fully absorbed-the balance amount becomes unabsorbed depreciation i.e., the depreciation which is claimed, but could not be absorbed fully against the profits, because of the paucity of profit. In respect of arrears depreciation, the assessee is not required to make any provision. Inviting our attention on the facts of the present case, Shri Malik submitted that the purpose of the assessee in claiming the amount of arrears of dep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of a company whose total income as computed under the provisions of Income-tax Act is less than 30 per cent of the book- profit computed under the section, the total income chargeable to tax will be 30 per cent of the book profit as computed. For the purposes of section 115-J, book profit will be the net profit as shown in the profit and loss account prepared in accordance with the provisions of the VIth Schedule-to the Companies Act, 1956 after certain adjustments. 11. Adverting to the provisions of section 115-J, we find that it involves two processes. Firstly, the Assessing Officer has to determine the income of the company under the provisions of the Income-tax Act. Secondly, the book profit is to be worked out in accordance with the Explanation to section 115-J(1) and it is to be seen whether the income determined under the first process is less than 30 per cent of the book profit. Section 115-J would be invoked if the income determined under the first process is less than 30 per cent of the book profit. The Explanation to sub-section (1) of section 115-J gives the definition of the 'book profit' by the incorporating the requirement of section 205 of the Companies Act in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 34, depreciation cannot be thrust upon him. It was laid down in the case of Appollo Tyres Ltd. that parts II III of Schedule VI do not contemplate making of a provision for arrears of depreciation either separately or along with the current years depreciation to be a charge against the profits of that year. This finding of the Hon'ble High Court was not disturbed by the apex court. The term unabsorbed depreciation' cannot be equated with the 'arrears of depreciation'. For unabsorbed depreciation the procedure is prescribed under the Act for its adjustment. The assessee first makes a claim in respect of depreciation as per law. If the profits are not adequate to absorb the entire amount of depreciation claimed, the remaining balance is treated as unabsorbed depreciation and for its adjustment procedure is prescribed under the IT Act. The depreciation which is not provided and claimed and only for the purposes of Companies Act, a note is furnished apropos the same can by no stretch of imagination be construed to be unabsorbed depreciation. 13. We have considered the factual submissions of the case. We have also perused the ruling rendered by the apex court in the case of Suran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... preceding years. It was not claimed because of the paucity of profits. Schedule VI - Part II (3)(iv) of the Companies Act prescribes that if no provision is made for depreciation assessee shall disclose this fact by way of a note. As such it was disclosed by way of a note. It is, therefore, clear that the facts of the present case are different from the facts of the Surana Steel's case. The apex court did not contemplate the eventuality-"Where no depreciation is provided for". 18. The ratio of the decision of the apex court rendered in the case of Mahendra Mills was not available before the Tribunal when the case for preceding year came for adjudication. As such some of the dark nooks concerning the issue could not be lightened. No part of a provision of a statute can be just ignored by saying that the legislature enacted if not knowing what it was saying. Where an expression is used by the legislature the court must assume that the legislature deliberately used that expression and that it intended to convey some meaning thereby. 19. The entire edifice of the case rests on the interpretation of the word "arrears of depreciation". The benefit claimed by the assessee can be avail ..... X X X X Extracts X X X X X X X X Extracts X X X X
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