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Income Tax Appellate Tribunal, ‘B’ BENCH, BENGALURU
O R D E R
Per INTURI RAMA RAO, AM :
This is an appeal filed by the assessee-company directed against the order of the ld. Commissioner of Income-tax (Appeals)- 5, Bengaluru, dated 30/5/2017 for the assessment year 2004-05.
Briefly, the facts of the case are that the assessee is a company incorporated under the provisions of the Companies Act, 1956. It is engaged in the business of manufacturing process of chemicals. Return of income for the assessment year 2004-05 was filed on 01/11/2014 disclosing total income at ‘nil’. Against said return of income, the assessment was completed by the Income-tax Officer, Ward 12(1), Bengaluru, [hereinafter referred to as ‘Assessing Officer’] vide order dated 31/10/2006 passed u/s 143(3) of the Income-tax Act,1961 [‘the Act’ for short] computing total income at Rs.3,16,28,544/- under the provisions of section 115JB of the Act. Accordingly, tax liability was also assessed u/s 115JB of the Page 2 of 4 Act as the income assessed under normal provisions of the Act was on ‘nil’. While doing so, AO added to book profits depreciation debited to P&L Account on account of re-valuation and allowed, as deduction the amount of eligible profits u/s 80HHC to the extent of 30% of eligible profits.
Being aggrieved, an appeal was filed before the ld.CIT(A) who, vide impugned order, dismissed the appeal. While doing so, ld.CIT(A) had confirmed addition to the book of account of profits on account of depreciation of revalued assets. However, had not considered ground relating to amount of deduction to book profits on account of eligible profits u/s 80HHC.
Being aggrieved, the assessee is before us raising the following grounds of appeal:
5. Learned counsel for assessee vehemently contended that it is only with effect from assessment year 2008-09, i.e. amendment by Finance Act,2006 was brought to the effect that exclusion of Page 3 of 4 depreciation on account of revaluation of assets shall not be allowed as a deduction and prior to the amendment, in view of the judgment of the Hon’ble Supreme Court in the case of Apollo Tyres vs. CIT (123 taxman.com 562)(SC) that the AO had limited power of making additions and reductions except as provided for in Explanation to sub-section and the AO had no power to go beyond net profit shown in P&L Account except in circumstances mentioned in Explanation to said section. He also submitted that depreciation of revalued assets is allowable for the purpose of computing book profits u/s 115JB, prior to amendment by the Finance Act, 2006. He also relied upon the judgment of the Hon’ble High Court of Allahabad in the case of CIT vs. Rampur Distillery & Chemicals Co. Ltd.(28 taxman.com 291)(All.).
On the other hand, Learned Departmental Representative relied on the orders of the lower authorities.
We heard rival submissions and perused material on record. The issue in appeal is squarely covered by the decision of the Hon’ble High Court of Allahabad High Court in the case of 28 taxman.com 291 wherein the Hon’ble High Court, after referring to the decision of the Hon’ble Supreme Court in the case of Apollo Tyres (supra) and accounting standard A6, have concurred with the view that depreciation on revalued fixed assets should be allowed as deduction for the purpose of computing book profit u/s 115JB. Accordingly, we allow this ground of appeal.
7 The next ground relates to deduction of eligible profits u/s 80HHC while computing taxable income u/s 115JB of the Act. The AO has allowed only 30% of the eligible profits as deduction while computing book profits u/s 115JB of the Act. It is the contention of the assessee that entire profits of Rs.11,72,752/- be allowed as deduction. An appropriate ground of appeal was raised before the ld.CIT(A), but the ld.CIT(A) has failed to adjudicate. Therefore, we remit this ground of appeal to the ld.CIT(A) for fresh adjudication in Page 4 of 4 accordance with law keeping in view the provisions of section 80Ab. 80HHC and 115JB of the Act.
In the result, the appeal filed by the assessee is partly allowed for statistical purposes.