2011 (1) TMI 1 - SUPREME COURT

MAT - Minimum alternate tax - revaluation of fixed assets - revaluation reserve - whether the amount transferred from the revaluation reserve and set off against the amount of depreciation debited to P and L Account can be excluded in terms of clause (i) of explanation to Section 115JB(2) read with the proviso? - Held that: - . It was found that companies had earned substantial book profits and had paid huge dividends but paid no tax. In the present case, had the assessee deducted the full depreciation from the profit before depreciation during the accounting year ending 31.3.2001, it would have shown a loss and in which event it could not have paid the dividends and, therefore, the assessee credited the amount to the extent of the additional depreciation from the revaluation reserve to present a more healthy balance sheet to its shareholders enabling the assessee possibly to pay out a good dividend. It is precisely to tax these kinds of companies that MAT provisions had been introduced. The object of MAT provisions is to bring out the real profit of the companies. The thrust is to find out the real working results of the company. Thus, the reduction sought by the assessee under clause (i) to the explanation to Section 115JB(2) in respect of depreciation has been rightly rejected by the AO.

. As the amount of revaluation reserves had not gone to increase the book profits at the time it was created, the benefit of reduction cannot be allowed.