COMMISSIONER OF INCOME TAX,HISAR vs. M/S PRAKASH INDUSTRIES LTD.

ITA No. 46 of 2003 1 IN THE HIGH COURT OF PUNJAB AND HARYANA AT

CHANDIGARH. Date of decision 28 .4.2010 C.M.No. 8121 CII of 2010 and ITA No. 46 of 2003 Commissioner of Income Tax ... Appellant Versus M/s Prakash Industries Ltd. ... Respondent C.M.No. 8118 CII of 2010 ITA No. 47 of 2003 Commissioner of Income Tax ... Appellant Versus M/s Prakash Industries Ltd. ... Respondent CORAM: HON'BLE MR. JUSTICE M.M. KUMAR HON'BLE MR. JUSTICE JITENDRA CHAUHAN Present: Mr. Sanjeev Kaushik,Advocate for appellant Mr. Sanjay Bansal, Sr. Advocate with Ms. Harpreet Kaur, Advocate for the respondent 1.To be referred to the Reporter or not ? 2.Whether the judgement should be reported in the Digest ? M.M.KUMAR, J. Civil Misc. Nos. 8118 and 8121 CII of 2010 This order shall dispose of Civil Misc. Nos. 8118 CII of 2010 and C.M.No. 8121 CII of 2010. Both these applications have been filed by the assessee with a prayer for disposal of ITA Nos. 46 and 47 of 2003 pleading that for the assessment year 1990-91, the commissioner of Income

ITA No. 46 of 2003 2 Tax (A), Rohtak has passed an order in respect assessment year 1990-91 on 4.1.1999 in favour of the assessee and against the Revenue. According to the CIT(A), the Assessing Officer committed an order by including the amount of deprecation of Rs. 2,73,87,218/- for the purpose of ascertaining book profits. Accordingly, the CIT(A) directed the Assessing Officer to exclude the same for the purposes of determination under Section 115 J of the Income Tax, 1961(for brevity 'the Act'). The submission made by the assessee- applicant is that the order passed on 4.1.1999 (R.2) has attained finality in respect of the assessment year 1990-91 as no appeal has been preferred by the Revenue before the Tribunal. On receipt of notice of the application, Mr. Sanjiv Kaushik, Advocate has put in appearance on behalf of the non applicant- appellant and could not controvert the averments made in the application. It has not been disputed that the order dated 4.1.1999 passed by the CIT(A) has attained finality in respect of the assessment year 1990-91. MAIN APPEAL Coming to the main appeal, it is pertinent to notice few facts in respect of the assessment year 1989-90. The assessee had filed return on 29.12.1989 declaring the income (loss) of Rs.2,27,31,201/- and income under Section 115 J of the Act amounting to Rs. 1,60,00,606/-. However, the return was revised on 22.2.1991 declaring a total income (loss) of Rs. 3,99,31,911/- and income under Section 115 J of the Act was declared as 'Nil'. The Assessing Officer, however computed profit under Section 115 J of the Act at Rs. 4,10,60,334/-. Accordingly, the Assessing Officer worked out profit under Section 115 J of the Act as under:

ITA No. 46 of 2003 3 Profit as per P&L account as per Profit and Loss A/c as per original return. Add. Depreciation Less: Depreciation as per Companies Act Book Profits Total Income under Section 115 J 53,33,553 71394144 76727697 35667363 41060334 12318100 The Assessing Officer did not accept the contention that depreciation could be provided as per schedule under the Act and ignored the revised return where revised commutation of profit under Section 115 J of the Act was given. The Assessing Officer held that it was incumbent upon the assessee to provide for depreciation as per requirement of Schedule XIV of the Companies Act. On appeal, the CIT (A) upheld the view taken by the Assessing Officer. On further appeal by the assessee, the Tribunal decided the issue in favour of the assessee by citing the judgement rendered by the Ahmedabad Bench of the Tribunal rendered in the case of ACIT v. Bell Ceremaics Ltd. (1999) 69 ITD 156. The view of the Tribunal is discernible from para 17 of the order which reads thus: “ We have considered the rival submissions and perused the record carefully. The issue involved in this ground is fully covered in favour of the assessee by the ratio of decision in the case of ACIT v. Bell Ceramics Ltd. as facts of that case were identical. In that case the assessee had charged depreciation on straight line method in the printed copy of P&L A/c laid before annual general meeting but in the P&L A/c prepared for the purpose of Section 115 J it had adopted written down value method for depreciation as provided for the income tax Act.

ITA No. 46 of 2003 4 The A.O. did not allow the assessee's claim and worked out the book profit on the basis of printed copy of P&L A/c and CIT (A) allowed the relief to the assessee. The Bench considered all the facts and noted that first proviso to sub section (2) of Section 115 JA was inserted by Finance (No.2 ) Act, 1996 w.e.f. 1.4.1997 which provided that method adopted for working out the depreciation while preparing P&L A/c shall be the same for the purpose of preparing the P&L A/c laid before the company on its annual general meeting in accordance with the provisions of the Companies Act. The Bench further observed that there was no such requirement u/s 115 J(1A) of the Act and if assessee had adopted the method of working out the amount of depreciation differently for the purpose of Section 115 J, there was no prohibition to restrain the assessee from doing so. It was also concluded that what was required u/s 115 J (1A) of the Act is that every assessee, being a company, shall for the purpose of this section prepare its P&L A/c for the relevant previous year in accordance with the provisions of Part II and III of Schedule VI of the Companies Act. There was no controversy before the Bench that assessee had not complied this requirement and accordingly the Bench concluded that there was no further requirement that the profit and loss account so prepared should be the same or similar to the P&L A/c placed before the annual general meeting of the company and allowed the claim of the assessee. Identical are the facts before us in the case of the assessee. “

ITA No. 46 of 2003 5 The Revenue feeling aggrieved by the Order of the Tribunal preferred two Appeals being ITA No. 46 of 2003 in respect of assessment year 1989- 90 and ITA No.47 of 2003 in respect of assessment year 1988-89 under Section 260 A of the Act. The appeals were admitted on the following question of law: “ Whether on the facts and in the circumstances of the case, the Hon'ble ITAT was right in law in rejecting the method adopted by the A.O. for working out the 'book profit' under Section 115 J(1A) of the Income Tax Act, 1961 as per requirement of Section 205 of the Companies Act, 1956 read with Part II and III of Schedule VI of Companies Act, 1956 and in allowing the WDV method adopted by the assessee for working out depreciation as against the straight line method adopted by the A.O. as per Section 350 of the Companies Act, 1956” Having heard the learned counsel for the parties and perusing the order of CIT(A) passed on 4.1.1999 (R.2) in respect of assessment year 1990-91, we are of the view that the principle of consistency would come in play. If in respect of assessment year 1990-91 the Revenue has accepted the order of the CIT(A) then it follows that in respect of the earlier year the same principle would apply in view of the decisions of Hon'ble the Supreme Court rendered in the cases of Radhasoami Satsang v. CIT (1992) 193 ITR 321, Berger Paints India

Ltd.

v. CIT (2004) 266 ITR 99, CIT v. J.K.Charitable Trust (2009) 1 SCC 196 and C.K.Gangadharan and another v. CIT (2008) 8 SCC 739. These decisions would guide us that once the Revenue has accepted the view of the CIT(A) in respect of the assessment

ITA No. 46 of 2003 6 year 1990-91 then it is not open to the Revenue to challenge the similar finding and deviate from its earlier stand. Learned counsel for the Revenue has not controverted the aforesaid factual position. It appears that even on merits the question of law appears to be covered in favour of the assessee and against the Revenue by virtue of the judgement rendered in the case of Deputy

Commissioner of

Income tax v. Surat

Textile

Mills Ltd.

(2010) 188 Taxman 158 (Guj.). For the reasons aforementioned the applications are allowed and the appeals are dismissed. The question of law is decided against the Revenue and in favour of the assessee. A copy of this order be placed on the file of connected appeal. (M.M.Kumar) Judge (Jitendra Chauhan) 28.4.2010 Judge okg