1999 (1) TMI 56 - AT - Income Tax

Summary

Issues:
1. Claim for 100% depreciation on plant and machinery used below the surface of earth.
2. Determination of deemed income under section 115J of the Income Tax Act, 1961.
3. Correctness of depreciation claim and book profit computation.

Analysis:
1. The appeal involved a dispute regarding the claim for 100% depreciation on plant and machinery used below the surface of earth by the assessee-company engaged in wire-line logging and perforation activities for oil exploration. The AO restricted the depreciation claim to 33.33% as the assessee was not directly involved in oil production but assisting oil companies in exploration. The CIT(A) allowed the higher rate of depreciation, leading to the appeal before the Tribunal.

2. The issue of determining the deemed income under section 115J of the Income Tax Act was raised, specifically focusing on the correct computation of book profit. The AO initially determined the deemed income based on the original profit and loss account, while the assessee argued that the revised accounts should be considered to show no book profit. The Tribunal deliberated on the correct interpretation of section 115J and the significance of preparing accounts in accordance with the Companies Act, 1956.

3. The correctness of the depreciation claim and book profit computation was extensively debated during the proceedings. The assessee contended that the AO should have considered the revised accounts for determining the deemed income under section 115J. On the other hand, the Departmental Representative argued that the AO had the authority to make adjustments in book profit if discrepancies were found. The Tribunal emphasized the importance of correctly computing book profit and ensuring compliance with statutory provisions.

In conclusion, the Tribunal allowed the appeal, directing the AO to reevaluate the depreciation claim and book profit computation in line with the guidelines provided. The decision highlighted the significance of adhering to statutory requirements in determining deemed income under section 115J, emphasizing the principles of equity and tax compliance. The judgment underscored the AO's responsibility to rectify errors and ensure accurate computation of book profit for taxation purposes, promoting fairness and justice in tax assessments.