Commissioner Of Income Taxchennai v. M/S.sundaram Finance Limitedchennai

IN THE HIGH COURT OF JUDICATURE AT MADRAS Dated : 13.2.2007 Coram The Honourable Mr.Justice P.D.DINAKARANandThe Honourable Mrs.Justice CHITRA VENKATARAMAN Tax Case (Appeal) No.11 of 2004 Commissioner of Income TaxChennai ...Appellant -vs- M/s.Sundaram Finance LimitedChennai Tax Case Appeal filed under Section 260(A) of the Income Tax Act,against the order of the Income Tax Appellate Tribunal Madras 'A' Benchdated 7.3.2003 in ITA No.639/Mds/95 - Assessment Year 1993-94 againstITA.No. 139/94-95, dated 25/01.95 on the file of the Commissioner ofIncome Tax (Appeals) Madras 34 against PAN 57-066-CU-3051-93 dated 8.11.94on the file of the Deputy Commissioner of Income Tax, Special Range II,Madras-34. For Appellant:Mrs.Pushya SitaramanSenior Standing Counsel forIncome Tax.For Respondent :Mr.R.Vijayaraghavanfor M/s.Subbraya Aiyar JUDGMENT (The judgment of the Court was delivered by CHITRA VENKATARAMAN,J) The above appeal is by the Revenue, relating to the Assessment Year1993-94. The two questions of law that arise for consideration in thisappeal are as follows:- 1. Whether in the facts and circumstances of thecase, the Tribunal was right in holding that where theassessment was under Section 115J for the earlier year,the assessee is entitled to excess depreciation? 2. Whether in the facts and circumstances of thecase, the Tribunal was right in holding that for a https://hcservices.ecourts.gov.in/hcservices/ prima facie adjustment under Section 143(1)(a), theassessing officer cannot look at the earlier year'sreturns? 2. This is related to granting of excess depreciation while computingthe income as per provisions of Section 115J. The assessing authorityoriginally accepted the return under Sec 143(1)(a) without any prima facieadjustment in the intimation and granted the depreciation as claimed bythe assessee. Considering the apparent mistake on the question ofgranting excess depreciation, the Assessing Authority sought to rectifythe intimation under Section 143(1)(a) by taking a recourse to Section154. The Assessing Authority, however, took the view that as per Section115J(2), even where the tax was paid on the basis of book profit,unabsorbed depreciation, investment allowance and past losses would betreated as fully availed to the extent of statutory profits of the year.Hence, the written down value of the assets to be adopted for determiningthe depreciation would be after deduction of the depreciation calculatedunder the normal provisions of the Act in the earlier assessment year inwhich the total income was assessed under Section 115J. On appeal, theCommissioner allowed the stand of the assessee that in respect of adebatable issue, there could not be an adjustment under Section 143(1)(a).He also referred to Circular No.689 dated 24.8.1994 to the same effect asstated above. He thus allowed the appeal. 3. Aggrieved by this, the Revenue filed an appeal before theTribunal. It noted that admittedly the Assessing Officer sought todisallow the depreciation by rectifying the original intimation underSection 143(1)(a). The income in the earlier years was computed underSection 115J. As per Section 115J(2), the depreciation has to bedetermined and carried forward without any reference to Section 115J(1).In any event, considering the fact that there could not be a rectificationon a debatable issue, the Tribunal rejected the plea of the Revenue. 3. Aggrieved by this, the Revenue filed an appeal before theTribunal. It noted that admittedly the Assessing Officer sought todisallow the depreciation by rectifying the original intimation underSection 143(1)(a). The income in the earlier years was computed underSection 115J. As per Section 115J(2), the depreciation has to bedetermined and carried forward without any reference to Section 115J(1).In any event, considering the fact that there could not be a rectificationon a debatable issue, the Tribunal rejected the plea of the Revenue. 4. The learned senior standing counsel fairly brought to ourattention a decision of this Court reported in 273 ITR 350 (CIT v. NAMEELLEATHERS AND UPPERS) and 283 ITR 200 (CIT Vs. SESHASAYEE PAPER AND BOARDSLTD.), on the scope of Section 143(1)(a) with reference to thejurisdiction available under Section 154 of the Act. While consideringsimilar contention on the jurisdiction under Section 154 of the Act, thisCourt held that the debatable issue does not fall within the purview ofprima facie adjustment or for rectification. As such, considering thedebatable nature of the claim at the time Section 143(1)(a) was exercisedand the scope of rectification under Section 154 of the Act, the order ofthe Tribunal is upheld to hold that the rectification taken in theproceedings embarked upon is totally unsustainable. In the light of the view we have taken, the Tax Case Appeal standsrejected since no substantial question of law arises for consideration. bg Sd/-Assistant Registrar, /true copy/ To Sub Assistant Registrar. 1.THE ASSISTANT REGISTRARINCOME TAX APPELLATE TRIBUNAL, RAJAJI BHAVAN III FLOOR, BESANT NAGAR, CHENNAI2. THE COMMISSIONER OF INCOME TAXAPPEALS MADRAS 34 3. THE DY COMMISSIONER OF INCOMETAX, SPL RANGE II MADRAS 344. THE COMMISSIONER OF INCOME TAXCHENNAI.+ One cc to M/s Pusya Sitaraman Advocate Sr 8976+ One cc to Mr.R. Vijayaraghavan Advocate SR 8752MM (co)sg 16/3/07T.C.(A)No.11 of 2004 13. 2.2007