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TMI Blog2012 (12) TMI 810X X X X Extracts X X X X X X X X Extracts X X X X ..... the finding has been given on merit than under the proceedings of 254 (2), the same cannot be reversed. - In favour of revenue - MISCELLANEOUS APPLICATION Nos. 118 & 119/Mum/2012 & ITA Nos. 6689 &471/Mum/2010 - - - Dated:- 13-6-2012 - SHRI P M JAGTAP, SHRI VIJAY PAL RAO, JJ. Assessee by Shri Vijay Mehta/Jayesh Dadia Revenue by Sh P C Maurya ORDER PER VIJAY PAL RAO, JM These two Miscellaneous Applications by the assessee are directed against the composite order dated 20th January 2012 of this Tribunal whereby the appeals of the assessee in ITA No. 6689/Mum/ 2010 and 471/Mum/2010, for the assessment years 2006-07 2007-08 respectively, were disposed off. 2 For the assessment year 2006-07, the assessee has stated in the miscellaneous application that while adjudicating the issue of disallowance of depreciation in respect of discarded assets, this tribunal has committed a mistake as the findings are based on erroneous factual premises. This grievance is common in both the assessment years; therefore, the identical averments have been made in the Miscellaneous Application No 119/Mum/2012 for the assessment year 2007 08. 2.1 The learned A.R of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owing the claim of the assessee when the plant and machinery and factory building were very much in existence and therefore, in view of the concept of block of assets, the depreciation cannot be disallowed. 3.1 It is to be noted that these contentions were already raised by the assessee in the appellate proceedings as recorded by the Tribunal in para 7 of the impugned order. Once all these facts as well as contentions raised by the assessee were considered by the Tribunal while deciding the issue, than in the proceedings under section 254 (2), the same cannot be re-appreciated. The Tribunal has given the findings on the merits of the issue in para 8 to 9 of the impugned order as under: 8 We have considered the rival contention as well as the relevant material on record. It is an admitted fact that the assessee discarded the assets in question in pursuance to the International Treaty called Montreal Protocol and received the compensation of 15.60 crores. Once the assets have been discarded and the assessee has received the compensation, then clause III of sec, 32(1) would apply. For ready reference, we quote clause III as under: 32. (1) [In respect of depreciation of (i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts and the contentions of the assessee, it has been held that once the assets were discarded in view of the agreement of international treaty called Monte Protocol and the assessee received the compensation of Rs. 15.60 crores, then even if the physical existence of some of the assets were still there, the depreciation on the same cannot be allowed because of the fact that the assets were already discarded and the business itself for which the assets were being used has been stopped by the assessee. Thus, when the assessee has received the compensation for discarding of the assets, than even the same has not been physically demolished or destroyed for the purpose of depreciation, the same cannot form part of block of assets of a non existing business. 4 Even otherwise this Tribunal has no jurisdiction to re-appreciate the contentions as well as evidence in the proceedings under section 254(2). It is a settled proposition of law that the scope of sec. 254(2) is very limited and circumscribed. A mistake apparent from record must be an obvious and patent mistake and not something which can be established by a long drawn process of reasoning which can be rectified u/s. 254(2). For ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nery can be allowed to the appellant. Since, the claim of depreciation was a wrong claim made by the appellant hence, profits were wrongly calculated to that extent in the accounts of the appellant. As the profits were not correctly computed as per Law therefore I hold that the AC was justified in making adjustments to that extent in the net profit declared by the appellant for the purpose of computing book profit u/s. 115JB of the Act. As regarding the claim of the appellant that the net profit as per the P L account once adopted by the share-holders cannot be disturbed in view of the Hon ble Apex Court decision given in the case of Apollo Tyres Ltd. 255 ITR 273. In this regard I would like to observe that if this analogy of the appellant is followed in every case then it will render the provisions of the I.T. Act infructuous. Further, I would like to observe that the decision of the Hon ble Apex Court was based on different facts where there was no such issue of any prima fade wrong claim of any deduction, more so of any such wrong claim of depreciation u/s. 32 where the company under mandatory law was forced to shut down its manufacturing establishment. Further, with the pas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... counts and particularly on the point of deprecation are not as per part 1I III of Schedule VI of the companies Act as well as AS-6 the said illegality cannot be allowed in the grab of limited powers of the AO u/s 115JB. 17.3 Sub.sec. (2) of sec. 115JB mandates that every assessee, being a company, shall for the purposes of this section prepare its P L account for the relevant previous year in accordance with the provisions of Parts II III of Schedule VI to the Companies Act, 1956. We quote sub.sec. (2) of sec. 115JB as under: (2) Every assessee, being a company, shall, for the purposes of this section, prepare its profit and loss account for the relevant previous year in accordance with the provisions of Parts II and III of Schedule VI22 to the Companies Act, 1956 (1 of 1956) : Provided that while preparing the annual accounts including profit and loss account, (i) the accounting policies; (ii) the accounting standards adopted for preparing such accounts including profit and loss account; (iii) the method and rates adopted for calculating the depreciation,shall be the same as have been adopted for the purpose of preparing such accounts including profit and loss acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Assessing Officer is concerned with the adjustments to be made with the net profit as shown in the profit and loss account. One of the moot question relevance to the issue before us is whether the Assessing Officer has power to alter the net profit ? In our considered opinion, Yes. We agree that it is settled law that Assessing Officer has the power to alternate, the net profit. In the following two cases, the Assessing Officer can rewrite the profit and loss account, i.e., to say that Assessing Officer should recalculate the net profit and then follow the adjustments of MAT as usual: (1) If it is discovered that profit and loss account is not drawn up in accordance with Part II and Part III of Schedule VI to the Companies Act. However, the Assessing Officer cannot disturb the Net Profit as shown by the assessee where there are no such allegations, fraud or misrepresentation but only a difference of opinion as to whether a particular amount should be properly shown in the profit and loss account or in the Balance Sheet. (2) If accounting policies, accounting standards not adopted for preparing such accounts and method, rate of depreciation which have been incorrectly adopted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cussion. The decision of the Bombay High Court in the case of Veekaylal investment Co. (P.) Ltd. (supra) holding that the book profits have to be computed in accordance with Parts II and if of Schedule VI to the Companies Act. This is in line with the decision of the Apex Court in the case of Apollo Tyres Ltd. (supra). The Mumbai High Court in the case of Akshay Textiles Trading Agencies (P.) Ltd. (supra) has held that there is no question of law in view of the decision of the Apex Court in the case of Apollo Tyres Ltd. (supra). From this we are not able to infer that the decision of the Bombay High Court in the case of Veekaylal Investment Co. (P.) Ltd. (supra), is no longer good in law. Therefore, this case does not help the assessee. 17.5 A similar view has been taken by the coordinate Bench of the Tribunal in the case of CIT vs Bombay Diamond reported in 33 DTR Mum(Trib) 59 vide order dated 30.11.2009. 17.6 It is clear from the above decision that the Assessing Officer has power to examine whether the accounts are maintained as per the Accounting Standard and policies as provided under the Companies Act. The Special Bench of the Tribunal, after considering the decision ..... X X X X Extracts X X X X X X X X Extracts X X X X
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