TMI Blog2002 (9) TMI 37X X X X Extracts X X X X X X X X Extracts X X X X ..... JA PANDIAN J. -The question referred for the opinion of the court is as follows : "Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is correct in law in holding that the book profits for the purpose of section 115J of the Income-tax Act, 1961, is to be computed after deducting the extra shift allowance relating to the earlier years and giving effect to clause (iv) of Explanation to section 115J ?" The assessment year is 1990-91. The assessee is a public limited company engaged in the manufacture and sale of yarn. For the previous year relevant to the assessment year 1990-91, a sum of Rs. 1,65,72,468 was debited in the accounts in accordance with sections 265 and 350 of the Companies Act relating to e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r), is less than thirty per cent. of its book profit, the total income of such assessee chargeable to tax for the relevant previous year shall be deemed to be an amount equal to thirty per cent. of such book profit. (1A) 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 (1 of 1956). Explanation.-For the purposes of this section, 'book profit' means the net profit as shown in the profit and loss account for the relevant previous year prepared under sub-section (1A), as increased by - (a) the amount of income-tax paid or payable and the provision theref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar), the amount withdrawn from reserves created or provisions made in a previous year relevant to the assessment year commencing on or after the 1st day of April, 1988, shall not be reduced from the book profit unless the book profit of such year has been increased by those reserves or provisions (out of which the said amount was withdrawn) under this Explanation ; or (ii) the amount of income to which any of the provisions of Chapter III applies, if any such amount is credited to the profit and loss account ; or (iii) the amounts (as arrived at after increasing the net profit by the amounts referred to in clauses (a) to (f) and reducing the net profit by the amounts referred to in clauses (i) and (ii) attributable to the business, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ofits for the purpose of declaring dividend. Hence the unabsorbed depreciation has to be set off against book profit as per the statutory provision, which cannot be faulted by the authority under the Income-tax Act. In the instant case, there is no dispute about the correctness of the figures of extra shift allowances and unabsorbed depreciation charged by the company in the accounting year ended March 31, 1990, but the dispute is whether the same could be done in the accounting year relevant to the assessment year 1990-91. When the statute expressly requires the setting off of depreciation of earlier years also against the current year's profits, such setting off has necessarily to be done. Section 205(1) of the Companies Act and section 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in this clause 'loss' refers to the amount of loss arrived at after taking into account the amount of depreciation provided in the profit and loss account. This interpretation would be consistent with the object sought to be achieved by enacting section 115J of the Income-tax Act, 1961. If 'loss' were to be taken as pre-depreciation loss, then the resultant computation will not be in conformity with the tenor of the provisions of section 205. The language of clause (b) of the proviso to section 205(1) is clear. It applies to those cases where the depreciation has been provided in accordance with the provisions of sub-section (1) of section 205." In another case Apollo Tyres Ltd. v. CIT [2002] 255 ITR 273 (SC), the facts, are similar to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le so looking into the accounts of the company, the Assessing Officer has to accept the authenticity of the accounts with reference to the provisions of the Companies Act, which obligate the company to maintain its accounts in a manner provided by that Act and the same to be scrutinised and certified by statutory auditors and approved by the company in general meeting and thereafter to be filed before the Registrar of Companies who has a statutory obligation also to examine and be satisfied that the accounts of the company are maintained in accordance with the requirements of the Companies Act. Sub-section (1A) of section 115J does not empower the Assessing Officer to embark upon a fresh enquiry in regard to the entries made in the books of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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