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TMI Blog2020 (2) TMI 1064X X X X Extracts X X X X X X X X Extracts X X X X ..... nder section 115J of the Income-tax Act, 1961, to rework net profits by substituting the rates prescribed in Schedule XIV to the Companies Act, 1956? allowed the appeal of the assessee and set aside the view taken by Kerala High Court. Learned counsel for the revenue was not able to dispute the above discussed legal position The judgment of the Supreme Court in Apollo Tyres Ltd.'s case [ 2002 (5) TMI 5 - SUPREME COURT] was found to be not applicable in the facts of that case. The issue related to profit and loss not being determined in accordance with Part II and Part III of Schedule VI to the 1956 Act was the bone of contention whereas in the present case, the controversy is as to whether depreciation can be claimed as per the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the facts and circumstances of the case, the depreciation for purposes of Section 115J of the Income Tax Act had to be worked out as per Schedule VI of the Companies Act or as per the Income Tax Rules, and Income Tax Act? The relevant facts are that the assessee filed return for the assessment year 1990-91 showing nil income. The case was taken up for scrutiny. The assessment under Section 115J of the Income Tax Act, 1961 (for short, 'the 1961 Act') was framed on 31.12.1991 at an income of ₹ 1,80,450/-. The depreciation was allowed but only as per the provisions of the Companies Act, 1956 (for short, 'the 1956 Act'). The Appellate Authority vide order dated 20.4.1992 allowed the appeal and remanded the matter ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng a company for income-tax under s. 115J of the IT Act question the correctness of the P L a/c prepared by the assessee-company and certified by the statutory auditors of the company as having been prepared in accordance with the requirements of Parts II and III of Sch. VI to the Companies Act? The Supreme Court considered Section 115J of the 1961 Act, examined the objects of introducing the said provision, considered the budget speech and held as under: 5......we find it difficult to acept the argument of the Revenue that it is still open to the AO to re-scrutinise this account and satisfy himself that these accounts have been maintaained in accordance with the provisions of Companies Act. In our opinion, reliance placed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e said view of the Tribunal. Therefore, we are of the opinion, the AO while computing the income under s. 115J has only the power of examining whether the books of account are certified by the authorities under the Companies Act as having been properly maintained in accordance with the Companies Act. The AO thereafter has the limited power of making increases and reductions as provided for in the Explanation to the said section. To put it differently, the AO does not have the jurisdiction to go behind the net profit shown in the P L a/c except to the extent provided in the Explanation to s. 115J. The Supreme Court in Malayala Manorama Co. Ltd. v. Commissioner of Income-Tax, (2008) 300 ITR 251 while dealing with the question: Wheth ..... X X X X Extracts X X X X X X X X Extracts X X X X
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