TMI Blog1998 (1) TMI 101X X X X Extracts X X X X X X X X Extracts X X X X ..... is 15% whereas, under the I.T. Act, it is 33.33% under w.d.v. method. Though the assessee showed in its books depreciation as per straight line method, for the purpose of computing the 'book profit' as per section 115J of the Act, the company adopted w.d.v. method and the depreciation was worked out as provided for under the I.T. Act, Le., at 33.33%. Thus higher rate of depreciation was claimed resulting in no taxable income as per section 115J of the Act. 4. Assessing Officer observed that the assessee is not entitled to maintain two sets of accounts, i.e., one for the Company law purpose and the other for I.T. purpose. He observed that even for the purpose of I.T. Return, the accounts have to be prepared in accordance with the Companies Act and hence, the rate and method adopted for the purpose of declaring dividends cannot be deviated for the limited purpose of computing the book profit under section 115J of the Act. He has gone further to observe that the company having worked out the depreciation as per straight line method, any excess depreciation claimed by following the different method would be of the character of reserve which need be added to the profit as per Part II ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aring the profit and loss account laid before the company at its annual general meeting in accordance with the provisions of section 210 of the Companies Act, whereas, such proviso is absent in section 115J of the Act. This makes the intention of the Legislature very clear that depreciation need not be calculated on the same method while computing the 'book profit' as per section 115J(1A) of the Act. Ld. counsel also adverted our attention to sections 350 and 205 of the Companies Act to highlight that under section 205, the assessee is given an option to adopt straight line method or w.d.v. method though under section 350 of the Companies Act, only w.d.v. method is prescribed. He has also furnished before us the P. L. A/c. copies in respect of the subsequent assessment years to show that this method was consistently followed by the assessee-company for I.T. purpose. He further relied upon the decision of the Bombay Bench of the Tribunal in the case of Modern Woollens Ltd. v. Dy. CIT [1993] 47 ITD 154 in support of his contention that the assessee has discretion to provide higher rates of depreciation than those laid down in Schedule XIV of the Companies Act, for the purpose of wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t reasonable interpretation in the facts and circumstances of the case. 10. Prior to insertion of sub-section (1A) of section 115J the Explanation to section 115J(1) used the words "net profit as shown in the profit and loss account for the relevant previous year prepared in accordance with the provisions of Parts II and III of the Sixth Schedule to the Companies Act, 1956". By the Finance Act, 1989 w.e.f. 1-4-1989, sub-section (1A) was inserted which reads as under: "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 VI to the Companies Act, 1956." Consequently, the words "prepared . . . Companies Act, 1956" were substituted by the words "prepared under sub-section (1A)". Thus, for the assessment year 1989-90, an assessee, in order to arrive at the 'book profit', has to prepare its profit and loss account for the relevant previous year in accordance with the provisions of Parts II and III of Schedule VI of the Companies Act. The words used in sub-section (1A) "for the purposes of this section, prepare its profit and loss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1A) of section 115J are identical, without any change whatsoever. However, two provisos were added to sub-section (2) to section 115JA which reads as under: "Provided that while preparing profit and loss account, the depreciation shall be calculated on the same method and rates which have been adopted for calculating the depreciation for the purpose of preparing the profit and loss account laid before the company at its annual general meeting in accordance with the provisions of section 210 of the Companies Act, 1956. Provided further that where a company has adopted or adopts the financial year under the Companies Act, 1956, which is different from the previous year under the Act, the method and rates for calculation of depreciation shall correspond to the method and rates which have been adopted for calculating the depreciation for such financial year or part of such financial year filling within the relevant previous year." 13. Such provisos were conspicuously absent in section 115J of the Act. A careful reading of the aforesaid provisos indicates the legislative intention insofar as the provisions of section 115JA are concerned. To make it more explicit, we may observe h ..... X X X X Extracts X X X X X X X X Extracts X X X X
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