TMI Blog2013 (3) TMI 120X X X X Extracts X X X X X X X X Extracts X X X X ..... he provisions of Companies Act. - held that:- Once the assessee closed the factory then the decision of the assessee to book the depreciation of dismantled assets has to be decided as per the provisions of companies Act as well as AS-6. The fundamental principle for providing deprecation on asset is diminution in the value of the assets due to wear and tear as a result of use or retain for business of the assessee. Thus, underline rule for depreciation is use or retain of assets for the purpose of the business of the assessee. When the asset has been discarded and dismantled, then in the absence of physical existence of the useful assets, mere retention of the assets in the books of account would not entitled for any depreciation even under the provisions of Companies Act. Assessing Officer has power to examine whether the accounts are maintained as per the Accounting Standard and policies as provided under the Companies Act. The Special Bench of the Tribunal in Rain Commodities Ltd. v. Deputy Commissioner of Income-tax [2010 (7) TMI 794 - ITAT HYDERABAD], after considering the decision of the Hon’ble Supreme Court in the case of Apollo Tyres Ltd. (2002 (5) TMI 5 - SUPREME ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in 328 ITR 81. We, therefore, restore this issue to the record of the Assessing Officer for fresh adjudication in the light of the decision cited supra and in accordance with law after giving due opportunity of being heard to the assessee. 6. Ground no.2 is regarding disallowance of depreciation on plant and machinery. 6.1 The brief facts relevant to the controversy are that the assessee was engaged in the business of manufacturing Chlorinated Rubber by using a solvent called Carbon Tetra Chloride (CTC). In pursuant to the International Treaty on environment named Montreal Protocol , the member countries have agreed to control and curtail use of certain Ozone Depleting Substances (ODS). The solvent called Carbon Tetra Chloride (CTC) used by the assessee was identified as ODS and accordingly the assessee entered into an agreement with IDBI, an agency appointed by the World Bank for disbursement of grant. 6.2 The assessee stopped the Chlorinated Rubber production permanently and discarded the plant and machinery used for manufacturing of Chlorinated Rubber and in lieu received a grant of Rs. 15.60 crores. The assessee claimed depreciation on the factory building and plant ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts. He has relied upon the following decisions: i) Decision of Hon ble Bombay High Court in the case of G R Shipping in IT Appeal no.598 of 2009 dt 28.7.2009 ii) Decision of Hon ble Gujarat High Court in the cased of Sonal Gum Industries (322 ITR 542) iii) Decision of Delhi High Court in the case of Yamaha Motor India P. Ltd. (328 ITR 297) iv) Decision of the ITAT Mumbai in the case of Untex Products P. Ltd. (22 SOT 429) v) Decision of the ITAT Mumbai in the cased of Swati Synthetics Ltd. (38 SOT 208) 7.1 On the other hand, the ld DR has submitted that when the assets in question were discarded and the assessee had already received an amount of Rs. 15.60 crores as compensation, then the depreciation is not allowable. He has further submitted that the Assessing Officer and the CIT(A) have recorded the fact that the assessee in the revised computation of income has accepted the wrong claim of depreciation made in the original return of income. Therefore, the assessee cannot raise this issue. He has relied upon the orders of the lower authorities. 8 We have considered the rival contention as well as the relevant material on record. It is an admitted fact that the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the facts or law. In view of the above, the ground of appeal is dismissed. 9. In view of the above discussion and the facts and circumstances of the case, we do not find any merit or substance in the claim of the assessee; accordingly the ground raised by the assessee is dismissed. 10. For the AY 2007-08, the assessee has raised the following effective grounds: (1) The Learned Commissioner of Income Tax (Appeals) has erred in law and on the facts of the case in confirming the action of the Assessing Officer in disallowing depreciation of `.2,06,747 claimed on Building and Plant Machinery which are forming part of block of assets. The action is unjustified, illegal and against the Provisions of the Act as well as against the decision of the Hon ble Jurisdictional High Court in the case of in the case of G R Shipping and Hon ble Delhi High Court in the case of Bharat Alumunium Co. Ltd. (2) The Learned Commissioner of Income Tax (Appeals) has erred in law and on the facts of the case in confirming the action of the Assessing Officer in disallowing claim of `.4,82,2 13 being the obsolete stock actually written-off. The action is unjustified and illegal. (3) The Learned C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the possession of the assessee during the year. The Assessing Officer further noted that the Board resolution declaring the said asset as obsolete was passed on 29th June 2007 which is after the closing of the accounting period. The Assessing Officer has also taken note of the fact that the permission of the Exercise Authority to disposes off was not taken up to the end of the previous year. Accordingly, by following the decision of the Hon ble jurisdictional High Court in the case of CIT vs Herdilla Chemicals Ltd reported in 225 ITR 532, the Assessing Officer held that the concerned stock neither sold nor otherwise disposed off by the assessee but was merely written off in the books of account would not entitled the assessee to claim the same as written off stock. The assessee challenged the action of the Assessing Officer before the CIT(A). The CIT(A) did not find any merit in the claim of the assessee and concurred with the view taken by the Assessing Officer. 14. We have heard the ld AR of the assessee as well as the ld DR and considered the relevant material on record. Nothing has been brought before us to negate the finding of the fact by the Assessing Officer that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omputation of book profits u/s 115JB except for the items listed in Explanation (1) of sec.115JB-II of the Act as held by the Hon ble Supreme Court in the case of Apollo Tyres Ltd vs CIT reported in 255 ITR 273. He has also relied upon the decision of the Hon ble jurisdictional High Court in the case of Kinetic Motors Co ltd reported in 262 ITR 330 and submitted that when the deprecation was actually debited to the P L account and certified by the Auditors, it was not permissible for the Assessing Officer to make any adjustment while computing the book profits u/s 115JB. 16.1 On the other hand, the ld DR has submitted that when the asset is no more in existence and the claim of the assessee is bogus, then it cannot be said that the depreciation accounted by the assessee is as per part II III of Schedule VI of the Companies Act. He has relied upon the orders of the lower authorities. 17. We have considered the rival contention as well as the relevant material on record. The moot question arises is whether the Assessing Officer while computation book profit u/s 115JB can look into depreciation provided in the books of account on the assets which have already been discarded an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 115JB after the decision of the Hon ble Apex court given in the case of Apollo Tyres Ltd. 255 ITR 273. Hence, the Assessing Officer was fully justified in adding back the depreciation claimed on the factory building and on plant machinery. Accordingly, the contentions raised by the appellant in this regard are rejected. 17.1 Once the assessee closed the factory then the decision of the assessee to book the depreciation of dismantled assets has to be decided as per the provisions of companies Act as well as AS-6. The fundamental principle for providing deprecation on asset is diminution in the value of the assets due to wear and tear as a result of use or retain for business of the assessee. Thus, underline rule for depreciation is use or retain of assets for the purpose of the business of the assessee. When the asset has been discarded and dismantled, then in the absence of physical existence of the useful assets, mere retention of the assets in the books of account would not entitled for any depreciation even under the provisions of Companies Act. 17.2 Even, as per AS-6, the depreciation has been defined as measure of wearing out, consumption or other loss of valu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 1956 (1 of 1956), which is different from the previous year under this Act, (i) the accounting policies; (ii) the accounting standards adopted for preparing such accounts including profit and loss account; (iii) the method and rates adopted for calculating the depreciation, shall correspond to the accounting policies, accounting standards and the method and rates for calculating the depreciation which have been adopted for preparing such accounts including profit and loss account for such financial year or part of such financial year falling within the relevant previous year. 17.4 In comparison to sec. 115J where the requirement of preparation of the accounts was limited as to prepare in accordance with the provisions of Parts II III of Schedule VI of the Companies Act, the requirement u/s 11JB is apart from preparation of accounts as per Part II III of Schedule VI of the Companies Act also requires that accounting policies and accounting standard etc., adopted for preparing the accounts shall be the same as per the Accounting Standard laid down before the Company in its Annual General Meeting. When there is an apparent and total departure from the Accounting St ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at under MAT, the Assessing Officer should take the net profit as computed by the assessee and then make the adjustments under section 11 5JB of the Act. It is common that some companies follow an accounting year under the Companies Act, 1956 which is different from the financial year under Income-tax Act, 1961. These companies generally prepare two sets of accounts - one for Companies Act and another for Income-tax Act. The reason being different accounting policies, standards, depreciation methods and rates are adopted in two sets of account so that higher profit is reported to shareholders and lower profit for the income-tax authorities. To curb the above practice only this recalculation of net profit under MAT was incorporated so that there should be a consistency in accounting policies, standards, methods and rates of depreciation within the knowledge of income-tax authorities. The decision of the Bombay High Court in the case of CIT v. Akshay Trading Agencies (P.) Ltd [2008] 304 ITR 401 the question referred to the High Court and the decision of the High Court, as reported are as under: C. Whether on the facts and the circumstances of the case and in law, the Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of Veekaylal Investment Co. (P.) Ltd. reported in 249 ITR 597 has taken a view that the decision in the case of Veekaylal Investment Co. P. Ltd. [supra] has not been overruled by the decision in the case of Akshay Textile Trading Agencies Pvt. [supra]. Accordingly, we do not find any error or illegality in the orders of the lower authorities on this issue. 18. The last ground is regarding levy of interest u/s 234B on MAT. 19. We have heard the ld AR as well as the ld DR and considered the relevant material on record. At the outset, we find that this issue is now covered against the assessee by the decision of the Hon ble Supreme Court in the case of Joint Commissioner of Income-tax v. Rolta India Ltd. Reported in 330 ITR 470(SC). Accordingly, this issue is decided against the assessee and in favour of the revenue. 20. The assessee has also raised an additional ground as under: Without prejudice to the ground numbers 3 4, the Learned Commissioner of Income Tax (Appeals) has erred in law in confirming the action of the Assessing Officer in determining the book profit of Rs.84,44,683 under section 11 5JB without reducing the figure of unabsorbed depreciation or ..... X X X X Extracts X X X X X X X X Extracts X X X X
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