TMI Blog2019 (8) TMI 1114X X X X Extracts X X X X X X X X Extracts X X X X ..... of appeal read as under :- On the facts and circumstances of the case ld. CIT(A) has erred in directing the Assessing Officer to reduce the amount of ₹ 5,37,61,180/- while computing the book profit u/s. 115JB of the I.T. Act of the assessee towards difference in depreciation without appreciating the fact that no such adjustment to book profit is permissible under the provisions of the I.T. Act . 3. Brief facts of the case are as under :- The Assessing Officer in this case made the impugned disallowance by observing as under :- The Assessing Officer has discussed the issue and observed as under: On going through the P L A/c it has been observed that assessee has credited an amount of ₹ 5,37,61,180/- under the head Earlier years adjustment- Difference in depreciation provision . During the assessment proceedings assessee was asked to file the details in respect of the adjustment of difference in depreciation provision amounting to ₹ 5,37,61,180/-. In response assessee filed a chart showing how the assessee has arrived at the figure of d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -02 to 2011-12. 2. This change in depreciation method was as per Accounting Standard - 6 (AS-6) issued by The Institute of Chartered Accountants of India. 3. The annual accounts were prepared as per accounting standards issued by the ICAI having statutory recognition under sec 211 of the of the Companies Act, 1956. 4. The learned assessing officer has not raised any doubts genuineness of change in method of charging depreciation from written down value under Income Tax Act to straight line method under Companies Act. 5. The change in accounting policies regarding depreciation was duly reported in Annual Accounts as per note no 2 of Schedule 13, forming part of the Balance Sheet and Profit Loss Account. 6. The Annual Accounts were duly approved by Board of Directors on 05/09/2011 and subsequently duly adopted by share holders in Annual General Meeting. 7. The said adopted Annual Accounts were duly filed with the Registrar of Companies under Companies Act, 1956. 8. The Appellant has written back the excess depreciation as per the provisions of The Companies ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the provision(s) (which, as aforesaid, by definition, only go to reduce the profits for the relevant year), so that they cannot go to increase the same, as in the case of, or in contradistinction to, the reserves, i.e., treated the two at par. The only meaningful way to harmonize this apparent anomaly is to increase the book profit of the relevant year(s); the provision of s. 115JB (or even s. 115JA) being applicable, by the amount of write back. To the extent the same does not lead to invocation of s. 115JB (s. 115JA), the amount written back can be validly reduced from the current year's profit, the balance not, as it would, if added to the book profit for that year, result in book profit tax, which stands not paid. For example, ₹ 3,68,008 written back for asst. yr. 1997-98, on its add back, results in the book profit for that year to increase to ₹ 15.39 lacs, the tax (including surcharge @ 13 per cent) on which works to ₹ 1,30,449, as against the tax liability for the year, which stands assessed at ₹ 4,32,146 (paper book pp. 16-19), so that s. 115JB does not get invoked. As such, the entire amount written back in that year (₹ 3.68 lacs) could r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ited to the profit and loss account for the year, had, in fact, gone to increase the 'book profit' for the relevant year, the said reduction would not be allowed. The assessee had, with reference to the return for each of the four preceding years, shown that the tax for those years stood computed under the regular provisions, even as the MAT provision (section 115JB) was applicable for the said years, implying that there had been no claim of tax reduction qua the amount of book profit represented by the excess depreciation relating to those years, i.e., as now written back. To the extent the same does not lead to invocation of section 115JA the amount written back can be validly reduced from the current year's profit, the balance not, as it would, if added to the book profit for that year, result in book profit tax, which stands not paid. The write back of the provision in the instant case was genuine. In the present case, no reservation was expressed by the revenue in this regard, and the assessee had explained it as in pursuance to the change in the method of accounting for depreciation with effect from the current year, consequent to the corresponding Accounting Stan ..... X X X X Extracts X X X X X X X X Extracts X X X X
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