TMI Blog1999 (2) TMI 99X X X X Extracts X X X X X X X X Extracts X X X X ..... epared in accordance with the provisions of Parts II and III of Schedule VI to the Companies Act, 1956 and depreciation is liable to be allowed in full. 4. Claim of depreciation on revalued assets liable to be allowed in full while working out profits under section 115J of the Income-tax Act, 1961." 2. Ground Nos. 1 and 2 were not pressed by the ld. counsel appearing on behalf of the assessee. Hence Ground Nos. 1 and 2 are rejected, as not pressed. 3. As regards Ground Nos. 3 and 4, the ld. counsel for the assessee drew our attention towards the elaborate facts mentioned in para 10 of the assessment order. He also invited our attention towards the extracts of notes on accounts relevant to revaluation of fixed assets and method of computing depreciation, in Schedule 21 to Balance Sheet as on31st March, 1989, a copy whereof has been placed at page 13 of the Paper Book. The ld. counsel contended that the various fixed assets were revalued on the basis of Valuation Report submitted to the Assessing Officer. The depreciation according to straight line method has been charged on the revalued amount of the gross block of assets. It was pointed out that such a course of action is cle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erred in adding back alleged excess depreciation of Rs. 72,94,362 for computing the Book Profits under section 115J of Income-tax Act, 1961. The Assessing Officer should be directed to delete the same for the purposes of computing book profit liable to tax in accordance with section 115J. 4. The ld. Sr. D.R. strongly supported the order of the CIT(A) and relied upon the reasons recorded in the order of the Assessing Officer. He submitted that depreciation is allowable on "actual cost'. The concept of actual cost cannot be given a go-by for purposes of computing minimum Book Profit liable to tax as per section 115J of the Act. He submitted that for a proper interpretation of section 115J, one should look to the object for which the relevant provision was inserted. The provision of section 115J was introduced with a view to ensure that all profit making companies should contribute some amount to the State exchequer, which otherwise reduced their taxable income to zero by virtue of various deductions admissible under the provisions of Income-tax Act. It was, therefore, provided that if the normal income computed as per the provisions of Income-tax Act, is less than 30% of its Book P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld not be reflected in the accounts finalised on31st December, 1988. 11. Depreciation on assets has been calculated for the period on Straight Line Basis of the rates specified in Schedule XIV (inserted by Companies Amendment Act, 1988) in the Companies Act, 1956 instead of the rates hitherto followed by the Company. 19. During the year 1984-85, the company revalued Land and Buildings of its works at Rail Majra. As a result of revaluation the Gross Block was increased by Rs. 1,10,49,357 and after changing depreciation of Rs. 1,14,818 on the revalued assets, a sum of Rs. 1,09,34,539 was transferred to Capital Revaluation Reserve Account on 30-6-1985. During the period an additional sum of Rs. 4,09,375 debited to Profit and Loss Account (Previous) year Rs. 1,14,818 debited to Capital Revaluation Reserve Account." The Assessing Officer has not disputed the quantum of revaluation of assets made by the appellant company nor they have rejected the report of the Registered Valuer submitted by the assessee support of such revaluation of assets. The manner and mode of writing off the depreciation on such revalued assets has been explained in various Guidance Notes on Accounting issued ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ear in accordance with the provisions of Parts II and III of Schedule VI of Companies Act, 1956. Explanation below the said provision further provides that the Book Profit as shown in the Profits Loss Account prepared as per sub-section (1A) will be increased by the various items enumerated in clauses (a) to (ha). The relevant clause (b) provides for adding back of the amount carried to any reserve. No such amount was debited in the Profit Loss Account while revaluing the assets. The enhancement in the value of assets was debited in the account of the respective fixed assets and the corresponding credit was made to capital revaluation reserve account. None of the other items enumerated in clauses (a) to (ha) of the said Explanation supports disallowance of depreciation of current year written off in the Profit Loss Account in conformity with the provisions of the Companies Act and in accordance with the accounting standards issued by the ICAI. The Assessing Officer has also not been able to point out that the Profit Loss Account prepared by the appellant company is not in accordance with the provisions of Parts II and III of Schedule VI of the Companies Act, 1956. The said ..... X X X X Extracts X X X X X X X X Extracts X X X X
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