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TMI Blog1997 (8) TMI 110X X X X Extracts X X X X X X X X Extracts X X X X ..... of plant and machinery, electric installations and the rates have been increased in view of the clarificatory Circular No. 2 of 1989 dated 7-3-1989 issued by the Company Law Board. In support, technical evaluation certificate from Chartered Engineer was filed. The submissions of the assessee were not acceptable to the Assessing Officer. According to him, technical evaluation is neither bona fide nor any disclosure has been made in the accounts in this regard. He expressed the view that there is no basis for charging depreciation for the whole of 21 months. The assessee ought to have provided for depreciation only for a period of 10 1/2 months as per Schedule XIV of the Companies Act. By allowing the depreciation accordingly, the Assessing Officer worked out profit under section 115J at a higher figure of Rs. 1,77,169. Aggrieved thereby, the assessee appealed. 3. Before the CIT (Appeals), the assessee filed written submissions. On consideration thereof, the CIT (Appeals) observed that as per section 115J, the assessee is required to prepare its profit and loss account as per Parts II and III of Schedule VI and accordingly, the assessee is required to provide for depreciation. He f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iso (a) thereto is inapplicable to the case of the assessee-company as it has provided for depreciation as per W.D.V. method. Likewise proviso (b) talks of carry forward of loss or depreciation. It does not cover depreciation provided for the year of account. According to him, the case of the assessee is covered by the provisions contained in (b) & (c) of sub-section (2) of section 205. He further submitted that the provisions of section 350 of Companies Act are not applicable to private companies which is clear from section 355 which says that sections 348 to 354 shall not apply to a private company unless it is a subsidiary of a public company. According to the Ld. counsel for the assessee, the assessee is a private limited company and it is not a subsidiary of any public company. 4.1 The learned counsel for the assessee further submitted that as per sub-section (1A) of section 115J, the assessee-company has to prepare its profit and loss account in accordance with the provisions of Parts II and III of Schedule VI to the Companies Act, 1956. Inviting our attention to item (iv) of Part II of Schedule VI, the learned counsel for the assessee submitted that the depreciation has to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if the total income is less than 30 per cent of the book profit, then it has to prepare a profit and loss account under section 115J(1A) for the relevant previous year in accordance with the provisions of Parts II and III of Schedule VI to the Companies Act. The book profit so arrived at as per profit and loss account under the Companies Act, shall be adjusted by addition to the various amounts enumerated under clauses (a) to (ha) of the Explanation to section 115J(1A) and reduced by the amounts mentioned under clause(s) (i) to (iv) of the Explanation. In the case of the instant assessee, the total income for the assessment year 1989-90 was in negative and hence, computation under section 115J was required to be made. Accordingly, the assessee filed computation under section 115J before the Assessing Officer, according to which book profit was computed at Rs. 24,464.44 Ps. As per Explanation to section 115J(1) book profit means the net profit as shown in the profit and loss account for the relevant previous year prepared under sub-section (1A) which provides that a company shall prepare its profit and loss account in accordance with the provisions of Parts II and III of Schedule V ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tes lower than those specified in the Schedule in relation to assets purchased after the date of applicability of the Schedule. However, if on the basis of a bona fide technological evaluation, higher rates of depreciation are justified, they may be provided with proper disclosure by way of a note forming part of annual account." Thus, as per the above clarification, higher rates of depreciation may be provided on the basis of technological evaluation. The assessee submitted before the Assessing Officer that it provided for higher rate of depreciation on the basis of technological evaluation and filed a certificate issued by the Chartered Engineer. The Assessing Officer rejected the said technological evaluation certificate on the basis of irrelevant considerations and ignored the plea of the assessee that the technological evaluation had the approval of the board of directors and that the assessee had made disclosure in the annual accounts about the depreciation method followed and also the depreciation rates or the useful lives of the assets as adopted by the assessee-company, they being different from the rates of depreciation specified in Schedule XIV. His observation that dis ..... X X X X Extracts X X X X X X X X Extracts X X X X
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