TMI Blog1977 (10) TMI 10X X X X Extracts X X X X X X X X Extracts X X X X ..... rial years actually charged to the profit and loss account, and the depreciation allowed in the assessment ?" Natwar Transport Co. Pvt. Ltd., the assessee, is a limited company doing motor transport business. The question referred to relates to the assessment years 1959-60 and 1960-61, for which the relevant accounting period ended on June 30, 1958, and June, 30, 1959. It is common ground that the assessee is a company in which the public are not substantially interested within the meaning of s. 23A. For the two assessment years, the total income computed was Rs. 1,84,887 for the first year and Rs. 90,514 for the second year. According to the profit and loss statement of the company, the profit was Rs. 92,228 and Rs. 60,745, respectively. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessment year 1959-60, a sum of Rs. 71,185 was the available profit and a sum of Rs. 50,671 was the available profit for the assessment year 1960-61. As the available profits computed by the AAC were higher than those ascertained by the IAC, the assessee's appeals failed for both the years. In a second appeal before the Tribunal, the figures given by the AAC in his order were not disputed except for the purpose of determining the quantum of tax liability to be deducted in arriving at the net commercial profits available for distribution. There was a difference in the depreciation allowance adjusted by the company in its accounts and the amount actually allowed by the revenue in the two assessments, the latter being less by Rs. 42,900 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dditional super-tax under s. 23A(1). It is from this order of the Tribunal that the above question has been referred to us for our determination. Mr. Joshi on behalf of the revenue submitted that in computing the commercial profits for the purposes of s. 23A regard must be had to the depreciation which is permissible under the Act. If an assessee has departed from such a practice, then the taxing authorities in computing the commercial profits for any year will be justified in determining the written down value as fixed for the purposes of income-tax for the departure that may have been made by the assessee-company in his books of account irrespective of the fact whether any deliberate attempt was made by mistake or by design for inflatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an or the director of a company and deal with the problem with a sympathetic and objective approach. It is further laid down in this case that though the balance-sheet of the company is not final for the purpose of s. 23A it affords a prima facie proof of the financial position of the company on the date when the dividend was declared. But nothing prevents the parties from establishing by cogent evidence that certain items were, either by mistake or by design, inflated or deflated or that there were some omissions. Nor is the company precluded from proving that the estimate in regard to certain items had turned out to be wrong and placing the actual figures before the ITO. The short question that has to be determined in the present case i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s affording proof of the company's state of affairs when the dividends were declared. If in the balance-sheet the assets are valued according to the bona fide commercial principles, the directors were clearly justified in taking the figures as therein represented as the basis for arriving at profits available for distribution of dividends. There is no justification for the taxing authorities for enhancing the available profits by the difference in the depreciation amount, more so, when it is not controverted on behalf of the revenue that the depreciation as provided by the company in its books of account was in consonance with the commercial principles. If the figures in the balance-sheet are borne in mind for determining the profits, then ..... X X X X Extracts X X X X X X X X Extracts X X X X
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