Commissioner Of Income Tax v. M/S Prakash Industries Ltd

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 withMs. 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 2010and C.M.No. 8121 CII of 2010. Both these applications have been filed bythe assessee with a prayer for disposal of ITA Nos. 46 and 47 of 2003pleading that for the assessment year 1990-91, the commissioner of Income ITA No. 46 of 2003 Tax (A), Rohtak has passed an order in respect assessment year 1990-91 on4.1.1999 in favour of the assessee and against the Revenue. According tothe CIT(A), the Assessing Officer committed an order by including theamount of deprecation of Rs. 2,73,87,218/- for the purpose of ascertainingbook profits. Accordingly, the CIT(A) directed the Assessing Officer toexclude the same for the purposes of determination under Section 115 J ofthe Income Tax, 1961(for brevity 'the Act'). The submission made by theassessee- applicant is that the order passed on 4.1.1999 (R.2) has attainedfinality in respect of the assessment year 1990-91 as no appeal has beenpreferred 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- appellantand could not controvert the averments made in the application. It has notbeen disputed that the order dated 4.1.1999 passed by the CIT(A) hasattained finality in respect of the assessment year 1990-91. MAIN APPEAL Coming to the main appeal, it is pertinent to notice few facts inrespect of the assessment year 1989-90. The assessee had filed return on29.12.1989 declaring the income (loss) of Rs.2,27,31,201/- and incomeunder 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 Jof the Act at Rs. 4,10,60,334/-. Accordingly, the Assessing Officer workedout profit under Section 115 J of the Act as under: The Assessing Officer did not accept the contention that depreciationcould be provided as per schedule under the Act and ignored the revisedreturn where revised commutation of profit under Section 115 J of the Actwas given. The Assessing Officer held that it was incumbent upon theassessee to provide for depreciation as per requirement of Schedule XIV ofthe Companies Act. On appeal, the CIT (A) upheld the view taken by theAssessing Officer. On further appeal by the assessee, the Tribunal decided theissue in favour of the assessee by citing the judgement rendered by theAhmedabad Bench of the Tribunal rendered in the case of ACIT v. BellCeremaics Ltd.(1999) 69 ITD 156. The view of the Tribunal is discerniblefrom para 17 of the order which reads thus: “ We have considered the rival submissions and perused therecord carefully. The issue involved in this ground is fullycovered in favour of the assessee by the ratio of decision in thecase of ACIT v. Bell Ceramics Ltd. as facts of that case wereidentical. In that case the assessee had charged depreciation onstraight line method in the printed copy of P&L A/c laid beforeannual general meeting but in the P&L A/c prepared for thepurpose of Section 115 J it had adopted written down valuemethod for depreciation as provided for the income tax Act. “ We have considered the rival submissions and perused therecord carefully. The issue involved in this ground is fullycovered in favour of the assessee by the ratio of decision in thecase of ACIT v. Bell Ceramics Ltd. as facts of that case wereidentical. In that case the assessee had charged depreciation onstraight line method in the printed copy of P&L A/c laid beforeannual general meeting but in the P&L A/c prepared for thepurpose of Section 115 J it had adopted written down valuemethod for depreciation as provided for the income tax Act. The A.O. did not allow the assessee's claim and worked out thebook profit on the basis of printed copy of P&L A/c and CIT(A) allowed the relief to the assessee. The Bench considered allthe facts and noted that first proviso to sub section (2) ofSection 115 JA was inserted by Finance (No.2 ) Act, 1996w.e.f. 1.4.1997 which provided that method adopted forworking out the depreciation while preparing P&L A/c shall bethe same for the purpose of preparing the P&L A/c laid beforethe company on its annual general meeting in accordance withthe provisions of the Companies Act. The Bench furtherobserved that there was no such requirement u/s 115 J(1A) ofthe Act and if assessee had adopted the method of working outthe amount of depreciation differently for the purpose ofSection 115 J, there was no prohibition to restrain the assesseefrom doing so. It was also concluded that what was required u/s115 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 therelevant previous year in accordance with the provisions of PartII and III of Schedule VI of the Companies Act. There was nocontroversy before the Bench that assessee had not compliedthis requirement and accordingly the Bench concluded thatthere was no further requirement that the profit and lossaccount so prepared should be the same or similar to the P&LA/c placed before the annual general meeting of the companyand allowed the claim of the assessee. Identical are the factsbefore us in the case of the assessee. “ The Revenue feeling aggrieved by the Order of the Tribunal preferredtwo 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 underSection 260 A of the Act. The appeals were admitted on the followingquestion of law: “ Whether on the facts and in the circumstances of thecase, the Hon'ble ITAT was right in law in rejecting the methodadopted by the A.O. for working out the 'book profit' underSection 115 J(1A) of the Income Tax Act, 1961 as perrequirement of Section 205 of the Companies Act, 1956 readwith Part II and III of Schedule VI of Companies Act, 1956 andin allowing the WDV method adopted by the assessee forworking out depreciation as against the straight line methodadopted by the A.O. as per Section 350 of the Companies Act,1956” Having heard the learned counsel for the parties and perusing theorder of CIT(A) passed on 4.1.1999 (R.2) in respect of assessment year1990-91, we are of the view that the principle of consistency would come inplay. If in respect of assessment year 1990-91 the Revenue has accepted theorder of the CIT(A) then it follows that in respect of the earlier year thesame principle would apply in view of the decisions of Hon'ble the SupremeCourt rendered in the cases of Radhasoami Satsangv. CIT (1992) 193 ITR321, 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 anotherv. CIT(2008) 8 SCC 739. These decisions would guide us that once theRevenue has accepted the view of the CIT(A) in respect of the assessment ITA No. 46 of 2003 year 1990-91 then it is not open to the Revenue to challenge the similarfinding and deviate from its earlier stand. ITA No. 46 of 2003 year 1990-91 then it is not open to the Revenue to challenge the similarfinding and deviate from its earlier stand. Learned counsel for the Revenue has not controverted theaforesaid factual position. It appears that even on merits the question of lawappears to be covered in favour of the assessee and against the Revenue byvirtue of the judgement rendered in the case of Deputy Commissioner ofIncome tax v. Surat Textile Mills Ltd. (2010) 188 Taxman 158 (Guj.). For the reasons aforementioned the applications are allowedand the appeals are dismissed. The question of law is decided against theRevenue and in favour of the assessee. A copy of this order be placed on the file of connected appeal. (M.M.Kumar) Judge 28.4.2010okg (Jitendra Chauhan)Judge