CIT LUDHIANA vs. M/S KWALITY CYCLES P.LTD.LUDHI
What did the High Court hold?
The High Court answered the question of law against the revenue and in favour of the assessee. The Court relied on its previous judgment rendered in I.T.R. No. 100 of 1999, The Commissioner of Income Tax, Ludhiana v. M/s Sona Woollen Mills (P) Limited, Ludhiana. This implies that the Court held that for the purpose of calculating book profit under Section 115-J, depreciation is to be allowed as per the provisions of the Income-tax Act, 1961, and not as per the provisions of the Companies Act. The ratio decidendi is that the computation of book profit under Section 115-J requires adherence to the depreciation provisions of the Income-tax Act.
What were the facts?
The Commissioner of Income-tax, Ludhiana (revenue) has filed an Income Tax Reference (ITR) No. 36 of 1998 before the High Court of Punjab and Haryana at Chandigarh. This reference arises from an order passed by the Income Tax Appellate Tribunal (ITAT), Chandigarh Bench, in I.T.A. No. 1596/Chandi/93 concerning the assessment year 1990-91. The ITAT had ruled in favour of the assessee, M/s Kwality Cycles Pvt. Ltd., Ludhiana. The core of the dispute revolves around the calculation of book profit under Section 115-J of the Income-tax Act, 1961.
What were the issues?
1. Whether, on the facts and in the circumstances of the case, the ITAT was right in law in holding that for the purpose of calculating book profit u/s 115-J, depreciation is to be allowed as per the provision of Income-tax Act, 1961, instead of depreciation as allowable under the provisions of Companies Act? The revenue contended that depreciation should be calculated as per the Companies Act for the purpose of book profit under Section 115-J. The assessee argued that depreciation should be as per the Income-tax Act. The ITAT had decided in favour of the assessee. The High Court was asked to decide whether the ITAT's decision was legally correct.
Which sections of the Income-tax Act were involved?
115-J
AI-generated summary — verify with the full judgment below
IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. I.T.R. No.36 of 1998 Date of decision: October 31, 2006 The Commissioner of Income-tax, Ludhiana. -----Applicant Vs. M/s Kwality Cycles 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 passed in I.T.A. No.1596/Chandi/93 in respect of assessment year 1990-91:- “Whether, on the facts and in the circumstances of the case, the ITAT was right in law in holding that for the purpose of calculating book profit u/s 115-J, depreciation is to be allowed as per the provision of Income-tax Act, 1961, instead of depreciation as allowable under the provisions of Companies Act?”
In view of our judgment rendered 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 31, 2006 ( RAJESH BINDAL ) ashwani JUDGE
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