TMI Blog2012 (6) TMI 564X X X X Extracts X X X X X X X X Extracts X X X X ..... ed:- 22-8-2011 - CHITRA VENKATARAMAN MRS., JAICHANDREN M., JJ. JUDGMENT Mrs. Chitra Venkataraman J.- 1. The tax case appeal is filed by the Revenue against the order of the Income-tax Appellate Tribunal, Madras "B" Bench, dated November 29, 2004, in I. T. A. No. 875/Mds/98 relating to the assessment year 1989-90 raising the following substantial questions of law : "1. Whether, in the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee was right in claiming deduction of the amounts withdrawn from the revaluation reserve during the assessment year, from the book profit under section 115JA ? 2. Whether, in the facts and circumstances of the case, the Tribunal was right in holding that denial of deduction of the amounts withdrawn from the revaluation reserve during the assessment year, from the book profit under section 115JA would amount to double addition ?" 2. The assessee filed its return for the abovesaid assessment year admitting the income of Rs. 32,44,880 under section 115J of the Income-tax Act, 1961 (hereinafter called as "the Act"). Subsequent to the completion of the assessment, it was noticed that in the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ciation 2,34,60,529 Depreciation 1,25,85,586 Less : Transfer from revaluation reserve 8,65,459 1,17,20,127 1,15,80,402 3. The assessee contended that considering the fact that the proviso carved out under section 115JA(1)(i) restricted the scope of reduction from the reserve for the period commencing on or after April 1, 1997, as the reserve created was much before the introduction of section 115JA, the claim of the assessee merited acceptance under section 115JA(1)(i) of the Act. 4. The Commissioner of Income-tax (Appeals), however, rejected the assessee's contention, holding that the claim was not in accordance with Schedule VI to the Companies Act, since the depreciation was calculated on the revalued assets. As no amount was withdrawn from the revaluation reserve and credited to the profit and loss account and that the revaluation was reduced by corresponding reduction in the value of the assets and had no repercussion in the profit and loss account, the assessee was not enti- tled to the relief. Aggrieved by the same, the assessee went on appeal before the Income-tax Appellate Tribun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rior to April 1, 1997, necessarily, are to be granted reduction under the substantive part covered in section 115JA(1)(i). He contended that the restriction on claim- ing reduction on the withdrawal point to reserve created out of the profit and loss account would have relevance only to those credited after April 1, 1997. Thus, pointing out to the fact that the decision of the Supreme Court concerning section 115JB cannot be applied straight to the case of the assessee falling under section 115JA and that reserve was created when section 115JA(1)(i) of the Act was not there, learned counsel submitted that no exception could be taken to the order of the Tribunal. He further drew the attention of this court to the Finance Act, 2002, and the Finance Act, 2007, to emphasis that the claim of the assessee cannot be, in any manner, cornered by any general principles of accountancy. 7. Heard learned standing counsel appearing for the Revenue and the learned counsel for the assessee and perused the documents available on record. 8. Before going into the decision of the apex court and the Delhi High Court, the provisions of section 115JA, particularly with reference to the Explanatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... except for the fact that section 115JA of the Act is applicable on and from April 1, 1997, and section 15JB is applicable on and from April 1, 2001. The assessee therein revalued its assets as on March 31, 2000, which resulted in the surplus value of Rs. 2,88,58,000. In order to equalise both sides of the balance- sheet, revaluation account was created in the balance-sheet. The profit remained untouched during the year 2000-01. So far as the revaluation of the assets is concerned, a sum of Rs. 26,11,74,000 being the differential depreciation was transferred to the said revaluation account and credited to the profit and loss account. The Assessing Officer disallowed a sum of Rs.26,11,74,000. Consequently, the said sum was added to the net profit. 10. The apex court pointed out that clauses (i) to (vii) of section 115JB of the Act represent items of reduction from the net profits. Referring to clause (i), the apex court pointed out that in the computation of the book profit, for the purpose of reduction, the amount withdrawn from any reserve must, in effect, impact the net profit as shown in the profit and loss account. Refer- ring to the accounting principles, the apex court poi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the balance-sheet, the ques- tion of granting relief to the assessee did not arise. The Delhi High Court also pointed out to the amendment brought forth to section 115JB under the Finance Act, 2002, and held that the position before the amendment as well as thereafter, thus, does not, in any manner, advance the case of the assessee. In so holding, the Delhi High Court also referred to the Memorandum Explaining the Provisions in the Finance Bill, 1989, to reject the case of the assessee. 12. In sum and substance, the Delhi High Court applied the decision of the apex court in the context of the fact that creation of the revaluation reserve account being referable to the balance-sheet assets portion and not by way of appropriation to the profit and loss account, the question of the assessee claiming reduction to the book profit did not arise. 13. In the light of the decision of the Delhi High Court laying down the law, we do not find anything exists in the case of the present assessee to emphasise that the amendment brought forth in 2002 by way of clarifica- tion to the proviso have relevance to the facts of the case. 14. Thus, going by the provisions, we hold that the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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