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TMI Blog1998 (3) TMI 187X X X X Extracts X X X X X X X X Extracts X X X X ..... s filed the original return on 21-6-1988 declaring income at Rs. 35,77,693 which was later on revised by filing a revised return on 6-3-1989 declaring income therein at Rs. 25,42,627 before completion of assessment, claiming non-applicability of the provisions of section 115J of the Act. The income was assessed under section 143(1)(a) on 30-3-1989 at Rs. 25,42,627. Later on, the Assessing Officer passed a rectification order under section 154 of the Act and computed the income under section 115J of the Act and made an addition of Rs. 10,35,066 against which an appeal was filed before the CIT(Appeals) but the assessee could not succeed and it has filed an appeal before us vide ITA No. 565/Ind./91. 4. The assessee had been following the method of providing depreciation on straight line method till the previous year ended on 30th April, 1986 relevant to the assessment year 1987-88. The assessee changed the method of providing depreciation from the assessment year 1988-89 from straight line method to WDV method and, accordingly, depreciation was charged at Rs. 2,60,84,138. In the subsequent assessment year i.e., 1989-90 the assessee again changed the method of providing depreciation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of Chartered Accountants in which it is mentioned that under the Companies Act the Board of Directors of the company is required to prepare a balance-sheet and profit and loss account in relation to every financial year and lay the same before the company in general meeting. Ordinarily the accounts once adopted at the general meeting cannot be reopened. It is further specified in the notes that after due consideration by the counsel at its 106th meeting it has been decided that the reopening or rectification of accounts after the annual general meeting should not be permitted under any circumstances. Mr. Despande further urged that the Companies (Amendment) Bill pertaining to the introduction of Schedule XIV in the Companies Act was passed on 24-5-1988 with retrospective effect from 2-4-1987 for providing depreciation as per Schedule XIV of the Companies Act. Consequent to this amendment, the assessee had to change its method for providing depreciation again from WDV method to the method prescribed as per Schedule XIV of the Companies Act. Since this Schedule had come in effect from 2-4-1987, the assessee has written back the excess charged depreciation for the period 2-4-1987 to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ground that it is only academic, Mr. Deshpande has submitted that since this issue has become academic he has no grievance against the order of the CIT(Appeals). None-the-less, he relied on the judgment of the MP High Court in the case of J.P. Tobacco Products (P.) Ltd. v. CIT 24 ITC 378 in which it was held that the deduction under sections 80HH and 80-I shall be allowed from the gross total income independently. 8. In oppugnation, the learned Departmental Representative, Shri S.K. Singh, has supported the observations of the Assessing Officer and the CIT(Appeals) made in their respective orders. Besides, he has invited our attention to the fact that the original return was filed on 21-6-1988 after the commencement of Companies (Amendment) Act, 1988 as the Presidential assent was given to the Companies (Amendment) Bill on 24-5-1988. The return of income was further revised by filing a revised return on 6-3-1989 but the assessee did not opt to declare or to put a note in its original return of income or revised return about the excess charged depreciation in the relevant previous year. The assessment was framed on the basis of the return filed by the assessee. In the subsequ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that there is no provision in the Companies Act which suggests that different rates of depreciation on the assets can be charged for a different period. There may be some provisions in the Act that for different assets, different rates of depreciation can be charged, but for the same assets different depreciation cannot be charged in one previous year. In the instant case, the assessee's accounting period ended on 30-4-1987 and Schedule XIV is applicable with effect from 2-4-1987. It means that at the end of the accounting period the depreciation is to be calculated at the rate prescribed under the Companies Act and as per the Companies Act on 30-4-1987 Schedule XIV was in force and depreciation should have been calculated as per Schedule XIV. If the assessee could not withdraw the excess charged depreciation for the whole year in the relevant assessment year is 1988-89 he should have written back the excess charged depreciation for the whole year in the next assessment year alongwith the note stating therein the reasons for non-withdrawal of the excess charged depreciation in the relevant assessment year. It was further urged by him that by non-disclosure of the excess charged de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccording to which the assessee has admittedly provided the excess depreciation. These facts became known to the revenue from the annual report filed alongwith the return of income for the subsequent assessment year ie., 1989-90. Relying upon this information the case of the assessee was examined and it was found that the assessee has provided excess depreciation in the A.Y. 1988-89 which effects the profit computed under section 115J of the Act. 10. We have carefully perused the judgments of Star Automobiles' case and Indian Oil Corpn.'s case and find that it was held by the Hon'ble Supreme Court in the case of Indian Oil Corpn.'s case that the Assessing Officer must have reason to believe that the income or profits or gains chargeable to tax had been underassessed or escaped assessment. There must be material to come to the conclusion that there was omission or failure to disclose fully or truly all material facts necessary for the year. Their Lordships have further held that this postulates a duty on every assessee to disclose fully and truly all material facts necessary for assessment. Therefore, the obligation is upon the assessee to disclose facts; secondly those facts shoul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act, the net profit worked out as per Parts II and III of the Schedule VI to the Companies Act are required to be reduced by the amount of loss or the amount of depreciation which would be required to be set off against the profit of the relevant previous year as if the provisions of clause (b) of the first proviso to sub-section (1) of section 205 of the Companies Act, 1956 are applicable. It means the depreciation is to be worked out as per the provisions of section 205 of the Companies Act. For examining the provisions of clause (b) of sub-section (1) of section 205 of the Companies Act, we feel it proper to reproduce the same hereunder: "205(1) (a) (b) if the company has incurred any loss in any previous financial year or years, which falls or fall after the commencement of the Companies (Amendment) Act, 1960, then the amount of the loss or an amount which is equal to the amount provided for depreciation for that year or those years whichever is less, shall be set off against the profits of the company for the year for which dividend is proposed to be declared or paid or against the profits of the company for any previous financial year or years, arrived at in both ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n otherwise the depreciation is to be worked out in accordance with section 350 of the Companies Act which says that depreciation shall be calculated with reference to the written down value of the assets, as shown by the books of the company, at the end of the financial year expiring at the commencement of this Act or immediately thereafter and at the end of the each financial year at the rate specified in Schedule XIV. For ready reference this section is also reproduced below:--- "350. The amount of depreciation to be deducted in pursuance of clause (k) of sub-section (4) of section 349 shall be the amount calculated with reference to the written down value of the assets as shown by the books of the company at the end of the financial year expiring at the commencement of this Act or immediately thereafter and at the end of each subsequent financial year at the rate specified in Schedule XIV. Provided that if any asset is sold, discarded, demolished or destroyed for any reason before depreciation of such asset has been provided for in full, the excess, if any, of the written down value of such asset over its sale proceeds or, as the case may be, its scrap value, shall be writt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s effective from 2-4-1987. We are unable to agree with this contention of the assessee. 16. From a careful perusal of record we find that since the assessment was rightly reopened under section 147(1)(a) of the Act and the assessee has provided the excess depreciation in the relevant assessment year, the revenue authorities are justified in disallowing the excess charged depreciation at Rs. 95,17,841 during the course of reassessment framed under section 143(3)/147 of the Act. 17. Having regard to the aforesaid observations, we find ourselves in agreement with the view of the CIT(Appeals) on this count. 18. With regard to the ground No. 5 which relates to deductions under sections 80HH and 80-I we agree with the view of the CIT(Appeals) that since the tax has been charged on book profit as per the provisions of section 115J of the Act and not on the computation of total income according to the normal provisions of the Act, the issue regarding deductions claimed under sections 80HH and 80-I becomes academic and needs no adjudication. However, we agree with the contention of the assessee that this issue is squarely covered by the judgment of the jurisdictional High Court in the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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