C.I.T. JDR. vs. M/S STERLING STEELS AND WIRES LTD.

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ITR/163/1996HC Punjab & HaryanaPHHC01034968199619 July 2007Author: MR. JUSTICE M.M. KUMAR,MR. JUSTICE AJAY KUMAR MITTAL2 pages
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What did the High Court hold?

The High Court held that the Tribunal was right in disapproving the action of the departmental authorities. The Court noted that the question of law referred to it had already been settled by the Supreme Court in the cases of Apollo Tyres Ltd. v. Commissioner of Income-tax, (2002) 255 ITR 273 and Kinetic Motor Co. Ltd. v. Deputy Commissioner of Income-tax, (2003) 262 ITR 330. The ratio decidendi from these Supreme Court judgments is that when computing book profit under Section 115-J, depreciation as per the Companies Act, which is the basis for book profit, should be considered, and any adjustments made by the departmental authorities contrary to this principle are not sustainable. Therefore, the addition made by the departmental authorities was incorrect. The question was answered against the revenue and in favour of the assessee.

What were the facts?

The Commissioner of Income-tax, Jalandhar (the revenue) filed an application under Section 256(1) of the Income-tax Act, 1961, seeking a reference of a question of law from an order of the Income Tax Appellate Tribunal, Amritsar Bench. The Tribunal's order, dated April 12, 1994, pertained to Income Tax Appeal No. 353(ASR)/1991 for the assessment year 1989-90. The dispute involved the addition of Rs. 210.40 lacs, representing depreciation from earlier years as per the assessee's books, while computing the 'book profit' under Section 115-J. This addition was made by the departmental authorities due to a change in the method of charging depreciation from the Straight Line Method to the Written Down Value Method.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in disapproving the action of the departmental authorities in adding back the amount of Rs. 210.40 lacs out of depreciation as per the assessee's books relating to earlier years, while computing 'book profit' for the purposes of Section 115-J, which had arisen from a change of the method of charging depreciation from the Straight Line Method to the Written Down Value Method? Assessee's Contention: The judgment does not record specific arguments made by the assessee's counsel. However, the outcome indicates that the assessee's position was upheld. Revenue's Contention: The revenue contended that the departmental authorities were justified in adding back the depreciation amount when computing book profit under Section 115-J, given the change in depreciation method. The revenue's argument was based on the action of the departmental authorities.

Which sections of the Income-tax Act were involved?

Section 115-J,Section 256(1)

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH I.T.R. No. 163 of 1996 DATE OF DECISION: 19.7.2007 The Commissioner of Income-tax, Jalandhar. …Applicant Versus M/s Sterling Steels and Wires Ltd., Vill. Chohal, Hoshiarpur. …Respondent CORAM: HON’BLE MR. JUSTICE M.M. KUMAR HON’BLE MR. JUSTICE AJAY KUMAR MITTAL Present: Mr. Sanjiv Bansal, Advocate, for the applicant-revenue. Mr. Sanjay Bansal, Senior Advocate, with Mr. Parvesh Saini, Advocate, for the respondent-assessee.

JUDGMENT M.M. KUMAR, J. On an application filed by the revenue under Section 256(1) of the Income-tax Act, 1961 (for brevity, ‘the Act’), the Income Tax Appellate Tribunal, Amritsar Bench, Amritsar (for brevity, ‘the Tribunal’) has referred the question of law, which is claimed to have emerge from its order dated 12.4.1994, passed in I.T.A. No. 353(ASR)/1991 in respect of assessment year 1989-90. The Tribunal has referred the following question of law for determination of this Court:- “Whether on the facts and in the circumstances of the case, the Tribunal is right in disapproving the action of the departmental authorities in adding back the amount of Rs. 210.40 acs out of depreciation as per the books of the assessee relating to earlier years. While computing ‘book profit’ for the purposes of section 115-J, which had arisen

I.T.R. No. 163 of 1996 from change of the method of charging depreciation from Straight Line Method to Written Down Value Method?” It has not been disputed by the learned counsel for the parties that similar question of law has already been settled by Hon’ble the Supreme Court against the revenue in the cases of Apollo Tyres Ltd. v. Commissioner of Income-tax, (2002) 255 ITR 273 and Kinetic Motor Co. Ltd. v. Deputy Commissioner of Income-tax, (2003) 262 ITR 330. In view of above, the question is answered against the revenue and in favour of the assessee. (M.M. KUMAR) JUDGE (AJAY KUMAR MITTAL) July 19, 2007 JUDGE Pkapoor 2

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