CIT LUDHIANA vs. M/S JOLY HOSIERY FACTORTY P.LT

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ITR/175/1998HC Punjab & HaryanaPHHC01037969199828 October 2006Bench: MR. JUSTICE ADARSH KUMAR GOEL,MR. JUSTICE RAJESH BINDAL1 pages
AI SummaryAllowed

What did the High Court hold?

The High Court of Punjab and Haryana at Chandigarh answered the referred question of law against the revenue and in favour of the assessee. The Court's decision was based on its judgment rendered on the same date in a similar case, I.T.R. No.100 of 1999, Commissioner of Income Tax, Ludhiana v. M/s Sona Woollen Mills (P) Limited, Ludhiana. While the specific reasoning from the Sona Woollen Mills case is not detailed in this judgment, the operative direction is that the Tribunal's view, allowing depreciation as per the Income-tax Rules for calculating book profit under Section 115J, is upheld. The Court did not expressly leave any issue undecided.

What were the facts?

The Commissioner of Income-tax, Ludhiana (the revenue) has referred a question of law to the High Court of Punjab and Haryana at Chandigarh. This arises from an order passed by the Income Tax Appellate Tribunal (ITAT), Chandigarh Bench, on June 13, 1997, concerning assessment year 1990-91. The dispute pertains to the calculation of book profit under Section 115J of the Income-tax Act. The ITAT had held that depreciation should be calculated as per the Income-tax Rules, not the Companies Act, 1956, a view purportedly based on an opinion from the then Chairman of the CBDT. The revenue is challenging this finding.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the Tribunal is right in holding that while calculating book profit u/s 115J, depreciation was to be allowed as per the provisions of the Income-tax Rules rather than the provisions of the Companies Act, 1956? 2. Whether the said view of the Tribunal was based entirely on the opinion expressed by the then Chairman of CBDT? Revenue's Contention: The revenue's reference implies disagreement with the Tribunal's finding on the calculation of depreciation for book profit purposes under Section 115J and the basis of that finding. The question framed by the Tribunal suggests the revenue disputes the application of Income-tax Rules over the Companies Act for depreciation and questions the reliance on the CBDT Chairman's opinion. Assessee's Contention: The assessee, M/s Jolly Hosiery Factory Pvt. Ltd., would implicitly support the Tribunal's decision that depreciation should be calculated as per the Income-tax Rules for the purpose of Section 115J.

Which sections of the Income-tax Act were involved?

Section 115J

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. I.T.R. No.175 of 1998 Date of decision: 28.10.2006 The Commissioner of Income-tax, Ludhiana. -----Applicant Vs. M/s Jolly Hosiery Factory Pvt. Ltd. Ludhiana. -----Respondent CORAM:- HON'BLE MR JUSTICE ADARSH KUMAR GOEL HON'BLE MR JUSTICE RAJESH BINDAL Present: Mr. S.K. Garg Narwana, Advocate for the revenue. ----- ORDER: Following question of law has been referred for opinion of this Court by the Income Tax Appellate Tribunal, Chandigarh Bench, Chandigarh, arising out of its order dated 13.06.1997 in I.T.A. No.1124/Chandi/93 in respect of assessment year 1990-91:- “Whether, on the facts and in the circumstances of the case, the Tribunal is right in holding that while calculating book profit u/s 115J, depreciation was to be allowed as per the provisions of the Income- tax Rules rather than the provisions of the Companies Act, 1956 and the said view of the Tribunal based entirely on the opinion expressed by the then Chairman of CBDT?”

In view of our judgment rendered today in I.T.R. No.100 of 1999 The Commissioner of Income Tax, Ludhiana v. M/s Sona Woollen Mills (P) Limited, Ludhiana, the question referred is answered against the revenue and in favour of the assessee. ( ADARSH KUMAR GOEL ) JUDGE October 28, 2006 ( RAJESH BINDAL ) ashwani JUDGE

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