THE C.I.T. B-C-V,BOMBAY vs. M/S. RIM TEXTILES PVT. LTD.

ITA/106/2002HC Bombay18 March 2009Bench: HON'BLE SHRI JUSTICE F.I. REBELLO, HON'BLE SHRI JUSTICE R.S. MOHITE2 pages

AI SummaryDismissed

What did the High Court hold?

The High Court held that the Tribunal was right in law in allowing the further deduction of Rs. 18,06,380/- on account of unabsorbed depreciation from the book profit. The Court agreed with the findings of the ITAT, stating that the department's approach of considering 'loss' to exclude depreciation debited in the books was unreasonable and improper. The reasoning was based on the ratio laid down by the Supreme Court in the case of Surana Steels Pvt. Ltd. Vs. Dy. Commissioner of Income-tax & Ors. reported in 237 ITR 777. In Surana Steels, the Apex Court held that the word 'loss' as used in the proviso to clause (b) of Section 205(1) of the Companies Act signifies the amount arrived at after taking into account the amount of depreciation and must be read and understood in the context of Section 115-J of the Income-tax Act. Consequently, the rule nisi issued was discharged. No issue was expressly left undecided.

What were the facts?

This case involves an Income Tax Application filed by the Commissioner of Income Tax (CIT), Bombay (Applicant/Revenue) against M/s. Rim Textiles Pvt. Ltd. (Respondent/Assessee). The Revenue sought a direction from the High Court on a question of law concerning the assessment year(s) not explicitly stated. The challenge was to an order passed by the Income Tax Appellate Tribunal (ITAT) which allowed a further deduction of Rs. 18,06,380/- on account of unabsorbed depreciation from the book profit. This deduction was permitted even though the Assessing Officer had allowed a business loss of Rs. 1,54,086/-. The core of the dispute revolved around the interpretation of Section 205(1)(b) of the Companies Act for the purpose of Section 115-J of the Income Tax Act.

What were the issues?

1. Whether, on the facts and in the circumstances, the Tribunal was right in law in allowing a further deduction of Rs. 18,06,380/- on account of unabsorbed depreciation from the book profit, even though the Assessing Officer had allowed the business loss of Rs. 1,54,086/-, which is the best of the two amounts, as per the provision of Section 205(1)(b) of the Companies Act for the purpose of Section 115-J of the I.T. Act? Assessee's Contentions: The judgment does not record specific contentions made by the assessee. However, it is implied that the assessee supported the ITAT's decision to allow the deduction of unabsorbed depreciation. Revenue's Contentions: The Revenue contended that the Tribunal was wrong in allowing the deduction of unabsorbed depreciation. Their argument was based on the premise that the Assessing Officer had allowed the business loss, and the interpretation of 'loss' under Section 205(1)(b) of the Companies Act, in the context of Section 115-J of the Income Tax Act, should not include depreciation debited in the books. They argued that if ignoring depreciation resulted in no loss, then nothing was to be deducted.

Which sections of the Income-tax Act were involved?

Section 205(1)(b), Section 115-J

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPLICATION NO.106 OF 2002 The CIT, BCV Bombay )..Applicants Vs. M/s.Rim Textiles Pvt.Ltd., )..Respondents ---- Mr.P.S.Sahadevan for the applicants. ---- Coram : F.I.Rebello & R.S.Mohite,JJ Date : 18.03.2009. Judgment :- ( Per : R.S.Mohite,J) 1. The question of law in respect of which the applicants seek a direction is as follows :- "Whether, the facts and in the circumstances the Tribunal was right in law in allowing further deduction of Rs.18,06,380/- on account of unabsorbed depreciation, from the book profit, even though the Assessing officer has allowed the business loss of Rs.1,54,086/- which is the best of the two amount as per the provision of section 205(1)(b) of the companies Act for the purpose of section 115-J of the I.T.Act ?" 2. The question has been dealt with and answered by the Supreme Court against the revenue in the case of Surana Steels Pvt.Ltd., Vs. Dy.Commissioner of Income-tax & Ors. reported in 237 ITR 777. In the aforesaid judgment the Apex Court has held that the word loss as used in the proviso to clause-(b) of CNR No : HCBM020202491995 Uploaded on - 21/08/2020 Downloaded on - 28/10/2026 05:48:57

: 2 : Section 205(1) of the Companies Act signifies the amount arrived at after taking into account amount of depreciation and it has to be so read and understood in the context of section 115 J of the Income-tax Act. 3. As indicated by the Tribunal and the record, the department proceeded on the footing "loss" did not include depreciation debited in the books and on the footing that where, by ignoring the figure of depreciation in the books, there was no loss, then nothing was to be deducted. ITAT found that this approach was unreasonable and improper. In view of the ratio laid down by the Apex Court, we agree with the findings of the ITAT. Consequently, rule stands discharged. (R.S.Mohite,J) (F.I.Rebello,J) Uploaded on - 21/08/2020 Downloaded on - 28/10/2026 05:48:57 Powered by TCPDF (www.tcpdf.org)

Recent GST High Court judgments

Search GST case law →