M/S SHARMAN UDYOG P.LTD. vs. COMMISSIONER OF INCOME TAX,LDH

ITA/19/2001HC Punjab & HaryanaPHHC01042025200119 February 2020Author: MR. JUSTICE AJAY TEWARI,MR. JUSTICE AVNEESH JHINGAN6 pages
AI SummaryRemanded

What were the facts?

The assessee, M/s Sharman Udyog Pvt. Ltd., is in appeal before the High Court against an order of the Income Tax Appellate Tribunal (Tribunal) dated June 22, 2000. The Tribunal had partly allowed an appeal filed by the revenue. The assessment year in question is 1989-90. The Assessing Officer (AO) disallowed depreciation claimed by the assessee as per the Income Tax Act, 1961, and Rules. The Appellate Authority directed the AO to compute profit under Section 115J allowing depreciation as per the Act and Rules, and also to allow deduction for unabsorbed depreciation. The revenue appealed to the Tribunal, which partly allowed the revenue's appeal, holding that depreciation as per the Companies Act, 1956, should be allowed and the assessee was not entitled to charge arrears of depreciation to the profit and loss account. The amount in dispute is not explicitly stated.

What did the High Court hold?

The High Court addressed questions (b) and (c) as covering the entire controversy. For question (c), the Court referred to its decision in ITA No. 134 of 2000—M/s Gita Forging (P) Ltd. v. Commissioner of Income Tax Patiala and another, decided on 5.2.2020, which was in favour of the assessee. For question (b), the Court noted the assessee's argument that the matter was covered by the Supreme Court decision in Apollo Tyres Ltd. v. Commissioner of Income-tax, Kochi, 2002 (255) ITR 273. The revenue's counsel conceded that the Supreme Court in Apollo Tyres Ltd. had dealt with the issue. The Court reproduced the Supreme Court's conclusion that the Assessing Officer, while computing income under Section 115J, has only the power of examining whether the books of account are certified by the authorities under the Companies Act as having been properly maintained. The AO has limited power of making increases and reductions as provided for in the Explanation to Section 115-J and does not have the jurisdiction to go behind the net profit shown in the profit and loss account except to the extent provided in the Explanation. Based on this, question (b) was answered in favour of the assessee. The matter was remanded back to the Assessing Officer to compute the income under Section 115J in accordance with law. The appeal was disposed of accordingly.

What were the issues?

1. Whether in the facts and circumstances of the case, the orders Annexures P-1 and P-3 are legally sustainable? (Mixed law and fact, turning on general principles of law and the specific orders). 2. Whether in the facts and circumstances of the case, the assessee is entitled to charge arrears of depreciation due to a change in the method of providing depreciation for earlier years to the profit and loss account of the current year for the purpose of computing book profit U/s 115-J of the Act? (Mixed law and fact, turning on Section 115J of the Income Tax Act, 1961). 3. Whether in the facts and circumstances of the case, “Book Profit” for purposes of Section 115-J of I.T. Act has to be calculated for arriving at the said figure had to be worked out as per schedule VI of the Companies Act and not as per the Income Tax Act and the Income Tax Rules? (Mixed law and fact, turning on Section 115J of the Income Tax Act, 1961 and Schedule VI of the Companies Act, 1956). Assessee's contentions: For question (b), the assessee argued that the matter is covered by the Supreme Court decision in Apollo Tyres Ltd. v. Commissioner of Income-tax, Kochi, 2002 (255) ITR 273. Revenue's contentions: The revenue's counsel was not in a position to dispute that the Supreme Court in Apollo Tyres Ltd.'s case dealt with the issue involved while dealing with question (i) framed in that case.

Which sections of the Income-tax Act were involved?

Section 115J,Section 260A

AI-generated summary — verify with the full judgment below

ITA No. 19 of 2001 [1]

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH

ITA No. 19 of 2001 Date of decision: February 19,2020 M/s Sharman Udyog Pvt. Ltd. .. Appellant v. Commissioner of Income Tax, Ludhiana and another .. Respondents CORAM: HON'BLE MR. JUSTICE AJAY TEWARI HON'BLE MR. JUSTICE AVNEESH JHINGAN Present: Mr. Alok Mittal, Advocate for the appellant. Mr. Rajesh Katoch, Senior Standing Counsel and Ms. Pridhi Jaswinder Sandhu, Junior Standing Counsel for the revenue.

... AVNEESH JHINGAN, J. The assessee is in appeal under Section 260A of the Income Tax Act, 1961 (for short, 'the 1961 Act') against the order dated 22.6.2000 passed by the Income Tax Appellate Tribunal, Chandigarh Bench (for short, 'the Tribunal') partly allowing the appeal of the revenue. Following substantial questions of law have been claimed in the appeal: “(a) Whether in the facts and circumstances of the case, the orders Annexures P-1 and P-3 are legally sustainable? (b) Whether in the facts and circumstances of the case, the assessee is entitled to charge arrears of depreciation due

The order continues below.

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