Vitrag Dyeing & Printing Mills Pvt.Ltd.,, Surat v. The ACIT.,Circle-4,, Surat

ITA 265/AHD/2008 | 1998-1999
Pronouncement Date: 29-07-2011 | Result: Allowed

Appeal Details

RSA Number 26520514 RSA 2008
Assessee PAN XIVOF1956A
Bench Ahmedabad
Appeal Number ITA 265/AHD/2008
Duration Of Justice 3 year(s) 6 month(s) 6 day(s)
Appellant Vitrag Dyeing & Printing Mills Pvt.Ltd.,, Surat
Respondent The ACIT.,Circle-4,, Surat
Appeal Type Income Tax Appeal
Pronouncement Date 29-07-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted A
Tribunal Order Date 29-07-2011
Date Of Final Hearing 29-06-2011
Next Hearing Date 29-06-2011
Assessment Year 1998-1999
Appeal Filed On 23-01-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD A BENCH (BEFORE S/SHRI D.K. TYAGI JM & A.N. PAHUJA AM) ITA NO.265/AHD/2008 [ASSTT. YEAR : 1998-1999] VITRAG DYEING & PRINTING MILLS PRIVATE LIMITED 201 ANAND MARKET RING ROAD SURAT. VS. ACIT CIRCLE-4 AAYAKAR BHAVAN MAJURA GATE SURAT. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI S.N.SOPARKAR AR REVENUE BY : SHRI S.K. MEENA DR O R D E R A.N. PAHUJA: THIS APPEAL BY THE ASSESSEE FILED ON 23.1.2008 AGAI NST AN ORDER DATED 26.11.2007 OF THE LD. CIT(APPEALS)-I SURAT RAISES THE FOLLOWING GROUNDS: 1. THE LD.CIT(A) HAS GROSSLY ERRED N LAW AND ON FA CTS IN CONFIRMING THE BOOK PROFIT UNDER SECTION 115JA OF RS.55 19 873 /-; 2. THE APPELLANT CRAVES LEAVE TO ADD A LTER DELETE OR MODIFY ANY GROUND OF APPEAL. 2. FACTS IN BRIEF AS PER RELEVANT ORDERS ARE THA T RETURN DECLARING NIL INCOME FILED ON 30.11.1998 BY THE ASSESSEE COMPANY ENGAGED IN THE BUSINESS OF DYEING AND PRINTING ON JOB WORK BASIS AFTER BEING PROCESSED U/S 143(1) OF THE INCOME-TAX ACT 1961[HEREINAFTER REFER RED TO AS THE ACT] WAS TAKEN UP FOR SCRUTINY WITH THE SERVICE OF A NOTICE U/S 143(2) OF THE ACT ON 2.10.1999.SUBSEQUENTLY ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT ON 20.12.2000.WHILE DETERMINING BOOK PROFITS U/S 115JA OF THE ACT THE ASSESSING OFFICER[ AO IN SHORT] INTER ALIA ADDED E ARLIER YEARS DEPRECIATION OF RS.55 19 873/-. ON APPEAL THE SAID ADDITION WAS D ELETED BY THE CIT(A).ON FURTHER APPEAL BY THE REVENUE BEFORE THE ITAT IT W AS PLEADED THAT THE LD. CIT(A) FAILED TO CONSIDER CLAUSE (III) OF THE EXPL ANATION TO SEC. 115JA OF THE ACT AND THEREFORE THE MATTER SHOULD BE RESTORED BA CK TO THE FILE OF THE CIT(A). ACCORDINGLY THE ITAT VIDE THEIR ORDER DATED 4-8-20 06 IN ITA NO.1732/AHD/2005 RESTORED THE ISSUE BACK TO THE FI LE OF THE LD. CIT(A) FOR PROPER APPRECIATION AND CONSIDERATION OF CLAUSE (II I) OF THE E XPLANATION BELOW SECTION 115JA(2) OF THE ACT. ITA NO.265/AHD/2008 -2- 3. IN PURSUANCE TO THE AFORESAID DIRECTIONS OF TH E ITAT THE LD. CIT(A) AFTER CONSIDERING THE AFORESAID CLAUSE (III) OF THE EXPLA NATION BELOW SECTION 115JA(2) OF THE ACT AND SUBMISSIONS OF THE ASSESSE E CONCLUDED AS UNDER: 2.1 I HAVE CONSIDERED THE SUBMISSIONS MADE BY THE APPELLANT AND OBSERVATION OFT HE AO. THE HONBLE SUPREME COURT I N THE CASE OF APOLLO TYRES (SUPRA) HAS SIMPLY STATED THAT IF THE ADDITION AND REDUCTION ARE AS PER THE PROVISIONS OF SECTION 115JA THEN THE Y WOULD BE IN ORDER BUT NO DISALLOWANCE OTHER THAN THOSE COVERED UNDER THE EXPLANATION CAN BE TRADE BY THE AO IF THE P&L A/C. ARE MADE AS PER SCHEDULE-VI OF COMPANIES ACT. IT IS VERY CLEAR THAT THIS DECISION OF HON'BLE SUPREME COURT WOULD NOT BE APPLICABLE IF THE DISALLOWANCE M ADE BY THE AO IS AS PER THE PROVISIONS OF SECTION 115JA. AS STATED ABOV E THE PROVISIONS OF CLAUSE (III) OF EXPLANATION BELOW SECTION 115JA(2) CLEARLY SAYS THAT THE BOOK PROFIT HAVE TO BE REDUCED BY ANY AMOUNT OF LOS S BROUGHT FORWARD OR UNABSORBED DEPRECIATION WHICHEVER IS LESS AS PER THE BOOKS OF ACCOUNTS. CLAUSE (III) SAYS THAT THE LOSS SHALL NOT INCLUDE DEPRECIATION MEANING THEREBY THAT IT SHOULD BE PURE BUSINESS LOS S BEREFT OF DEPRECIATION AND IT ALSO SAYS THAT THE PROVISIONS O F THIS CLAUSE WAS NOT APPLICABLE IF THE AMOUNT OF LOSS BROUGHT FORWARD OR UNABSORBED DEPRECIATION IS NIL. THE MEANING OF THIS PROVISION IS THAT IF THE UNABSORBED LOSS OR BROUGHT FORWARD DEPRECIATION IS NIL THEN NO DEDUCTION HAS TO BE ALLOWED FOR COMPUTING THE BOOK PROFIT. NEITHER DURING THE ASSESSMENT ORDER NOR DURING THE APPELLAT E PROCEEDINGS BEFORE THE CIT(A) AS WELL AS ITAT IN THE EARLIER PR OCEEDINGS THE APPELLANT POINTED OUT THAT IT HAS LOSS AND UNABSORB ED DEPRECIATION IS NOT NIL. EVEN DURING THE CURRENT APPELLATE PROCEEDI NGS DESPITE THE ITAT MENTIONING CLEARLY THAT THIS CLAUSE HAS TO BE CONSI DERED THE APPELLANT HAS FAILED TO SHOW THAT ITS LOSS IS NOT NIL AND THA T IF THE LOSS IS MORE THEN THE UNABSORBED DEPRECIATION WOULD BE ALLOWABLE. AS REGARDS THE CLAIM OF EARLIER YEAR DEPRECIATION DURING THE CURRENT YEA R AMOUNTING TO RS.55 19 873/- IT IS SEEN THAT ALTHOUGH THE APPELLA NT IS REQUIRED TO CLAIM DEPRECIATION REGULARLY IN EVERY YEAR AND IF IT HAD DONE SO THIS DEPRECIATION WOULD HAVE BEEN APPEARING IN THE BALAN CE SHEET AS UNABSORBED DEPRECIATION. JUST BECAUSE THE APPELLANT HAS NOT CLAIMED THE DEPRECIATION IN THE EARLIER YEAR AND HAS CLAIME D IT FOR THE FIRST TIME IN THE CURRENT YEAR IT CANNOT BE CALLED THAT IT IS A CURRENT YEAR'S DEPRECIATION. ITS CHARACTER REMAINS THAT OF UNABSOR BED DEPRECATION AS PER COMPANIES ACT AND AS PER SCHEDULE-V1. 'THEREFOR E THIS DEPRECIATION IS CONTRARY TO THE PROVISIONS OF SCHED ULE-VI OF THE COMPANIES ACT. IN VIEW OF THIS REASON THE DISALLOWA NCE MADE BY THE AO OF THIS CLAIM IS CORRECT AS IT IS NOT AS PER SCH EDULE-VI OF THE COMPANIES ACT. IN THE PRESENT CASE THE AUDITORS HAV E REMARKED IN THE EARLIER YEAR THAT THE APPELLANT HAS NOT CHARGED DEP RECIATION AND THE AUDITORS HAVE ALSO MENTIONED IN THE CURRENT YEAR TH AT THE ASSESSEE HAS CHARGED DEPRECATION OF EARLIER YEARS IN THE CURRENT YEAR. THEREFORE ITA NO.265/AHD/2008 -3- THERE IS A QUALIFICATION BY THE AUDITORS. SINCE THI S AMOUNT IS NOT AS PER THE COMPANIES ACT THE APPELLANT CANNOT RELY ON THE DECISION IN THE CASE OF APOLLO TYRES AS IN THE PRESENT CASE THE ISS UE IS THAT IN WHICH THE AUDITORS HAVE MADE QUALIFICATION IN THE EARLIER YEARS AS WELL AS IN THE CURRENT YEAR. IN THE CURRENT YEAR THIS QUALIFIC ATION OCCURS AT PARA II OF THE NOTES FORMING THE PART OF ACCOUNT. HENCE THE DISALLOWANCE MADE BY THE AO IS AS PER THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF APOLLO TYRES (SUPRA). 2.2 IT IS SEEN FROM THE COMPUTATION IN THE ASSESSME NT ORDER THAT THE ASSESSEE HAS ALSO CLAIMED UNABSORBED LOSS/DEPRECIAT ION WHICHEVER IS LESS OF RS.6 23 745/-. DURING THE APPELLATE PROCEED INGS THE APPELLANT HAS NOT BEEN ABLE TO EXPLAIN AS WHAT IS THIS FIGURE . FROM THE BALANCE SHEET OF F.Y.1997-97 RELEVANT TO THE CURRENT YEAR I T IS SEEN THAT THE PREVIOUS FIGURE SHOWS THAT THERE IS A CARRIED FORWA RD LOSS OF RS.18 16 914/- AS PER SCHEDULE X WHICH IS NOTHING B UT UNABSORBED DEPRECIATION FROM EARLIER YEARS. THERE IS NO BROUGH T FORWARD LOSS. FURTHER SINCE THE APPELLANT HAS NOT GIVEN ANY FIGUR E REGARDING BUSINESS LOSS THEREFORE IT IS CLEAR THAT THE LOSS IS NIL A ND HENCE AS PER CLAUSE (B) OF EXPLANATION BELOW CLAUSE (III) OF EXPLANATION BE LOW SECTION 115JA(2) NO DEDUCTION OF UNABSORBED DEPRECIATION CAN BE ALLO WED. THEREFORE THE DISALLOWANCE OF RS.55 19 873/- MADE BY THE AO I S CORRECT. 4. THE ASSESSEE IS NOW IN APPEAL BEFORE US AGAIN ST THE AFORESAID FINDINGS OF THE LD. CIT(A). THE LD. AR ON BEHALF OF THE ASSESSE E WHILE INVITING OUR ATTENTION TO NOTE 11 TO THE ACCOUNTS CONTENDED THAT EARLIER THE ASSESSEE WAS FOLLOWING STRAIGHT LINE METHOD OF DEPRECIATION. DUR ING THE YEAR UNDER CONSIDERATION THE METHOD OF WAS CHANGED TO WDV AND ACCORDINGLY DEPRECIATION OF RS. 55 19 873/- OF EARLIER YEARS W ORKED OUT UNDER THE WDV METHOD WAS DEBITED TO THE PROFIT AND LOSS ACCOUNT A ND CONSEQUENTLY LOSS OF RS.56 36 887/- WAS OVERSTATED. THE LD. AR POINTED OUT THAT CLAUSE (III) OF THE EXPLANATION BELOW SECTION 115JA(2) OF THE ACT WAS NOT APPLICABLE IN THEIR CASE AND THE LD. CIT(A) WRONGLY CONCLUDED THAT T HE AFORESAID DEPRECIATION WAS UNABSORBED DEPRECIATION AS PER THE SCHEDULE VI OF THE COMPANIES ACT 1956. INTER ALIA THE LD. AR RELIED UPON THE D ECISIONS IN MALAYALA MANORAMA CO. LTD. V. COMMISSIONER OF INCOME-TAX 30 0 ITR 251 (SC); CIT VS.TIDEL PARK LTD. 334 ITR 126 (MAD) AND DECISION DATED 13-8-2010 OF ITAT AHMEDABAD BENCH IN INDIAN RESEARCH MANIFESTATION LA BS PVT. LTD. VS. ACIT IN ITA NO.391/AHD/2008 AND 510/AHD/2008. TO A QUER Y BY THE BENCH THE LD. ITA NO.265/AHD/2008 -4- AR REPLIED THAT DECISION IN MALAYALA MANORAMA CO. LTD.(SUPRA) HAS BEEN REFERRED TO A LARGER BENCH IN DYNAMIC ORTHOPEDICS P . LTD. V. COMMISSIONER OF INCOME-TAX 321 ITR 300 (SC) . THE LEARNED DR ON THE OTHER HAND RELIED UPON THE FINDINGS IN THE IMPUGNED ORDER. 5. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUG H THE FACTS OF THE CASE. THE ISSUE BEFORE US IS AS TO WHETHER THE DEPRECIAT ION OF RS. 55 19 873/- OF THE EARLIER YEARS DEBITED TO PROFIT AND LOSS ACCOU NT IN THE YEAR UNDER CONSIDERATION IN CONSEQUENCE OF CHANGE IN METHOD O F DEPRECIATION FROM STRAIGHT LINE METHOD TO WDV METHOD IS REQUIRED TO BE ADDED BACK WHILE DETERMINING BOOK PROFITS IN TERMS OF PROVISIONS OF SEC. 115JA OF THE ACT. THE REVENUE IS OF THE OPINION THAT IT IS REQUIRED TO BE ADDED BACK IN TERMS OF DECISION OF THE HONBLE SUPREME COURT IN APOLLO TYR ES 255 ITR 273(SC) THE CLAIM BEING NOT IN ACCORDANCE WITH SCHEDULE-VI TO T HE COMPANIES ACT 1956.ON THE OTHER HAND THE LD. AR RELIED UPON A NUMBER OF DECISIONS IN THEIR SUPPORT. THE FIRST SUCH DECISION IS IN MALAY ALA MANORAMA CO. LTD.(SUPRA) WHERE IN THE ISSUE WAS AS TO WHETHER T HE ITO HAD JURISDICTION U/S 115J OF THE ACT TO REWORK NET PROFITS BY SUBSTITUTI NG RATES PRESCRIBED IN SCHEDULE XIV TO THE COMPANIES ACT 1956. IN THIS CAS E HONBLE KERALA HIGH COURT HELD IN THE LIGHT OF THE DECISION OF THE HON BLE SUPREME COURT IN SURANA STEELS PVT. LTD V. DEPUTY CIT [1999] 237 ITR 777 THAT THE DEPRECIATION ALLOWABLE HAS TO BE CALCULATED AT THE RATES PROVIDE D IN SCHEDULE XIV TO THE COMPANIES ACT 1956. EARLIER HONBLE KERALA HIGH CO URT IN THE CASE OF CIT V. APOLLO TYRES LTD. [1999] 237 ITR 706 (KER) HAD HEL D THAT FOR THE PURPOSE OF SECTION 115J OF THE ACT DEPRECIATION HAS TO BE COMP UTED IN ACCORDANCE WITH THE COMPANIES ACT 1956 AND NOT AS PER THE INCOME-TA X RULES. LATER THE HONBLE APEX COURT IN APOLLO TYRES LTD. VS. CIT 25 5 ITR 273(SC) HELD THAT THE ASSESSING OFFICER DOES NOT HAVE THE JURISDICTIO N TO GO BEHIND THE NET PROFIT SHOWN IN THE PROFIT AND LOSS ACCOUNT EXCEPT TO THE EXTENT PROVIDED IN THE EXPLANATION TO SECTION 115J OF THE ACT. FACTS IN TH IS CASE WERE THAT THE ASSESSEE-COMPANY WHILE DETERMINING ITS NET PROFIT F OR THE RELEVANT ACCOUNTING YEAR PROVIDED FOR ARREARS OF DEPRECIATION IN ITS PROFIT AND LOSS ACCOUNT WHICH ITA NO.265/AHD/2008 -5- ACCORDING TO THE REVENUE WAS NOT IN ACCORDANCE WITH PARTS II AND III OF SCHEDULE VI TO THE COMPANIES ACT 1956. THEREFORE THE ASSESSING OFFICER WHILE CONSIDERING THE CASE OF THE ASSESSEE-COMPANY UNDER SECTION 115J OF THE INCOME-TAX ACT RECOMPUTED THE SAID PROFIT AND L OSS ACCOUNT OF THE COMPANY SO AS TO EXCLUDE THE PROVISION MADE FOR ARR EARS OF DEPRECIATION. THE ITAT HELD THAT THE ASSESSING OFFICER HAS NO AUTHORI TY TO REOPEN THE ACCOUNTS OF A COMPANY WHICH IS CERTIFIED BY THE AUDITORS OF THE COMPANY AS HAVING BEEN MAINTAINED IN ACCORDANCE WITH THE PROVISIONS O F THE COMPANIES ACT AND WHICH ACCOUNT HAS BEEN ACCEPTED IN THE GENERAL MEET ING OF THE COMPANY AS WELL AS BY THE REGISTRAR OF COMPANIES. THIS VIEW OF THE TRIBUNAL WAS NOT ACCEPTED BY THE HIGH COURT. HONBLE APEX COURT HEL D THAT THE ASSESSING OFFICER DOES NOT HAVE THE JURISDICTION TO GO BEHIND THE NET PROFIT SHOWN IN THE PROFIT AND LOSS ACCOUNT EXCEPT TO THE EXTENT PROVID ED IN THE EXPLANATION TO SECTION 115J OF THE ACT. 5.1 FOLLOWING THE VIEW TAKEN IN THE AFORESAID DECISION IN APOLLO TYRES LTD. (SC) HONBLE SUPREME COURT IN MALAYALA MANORAMA C O. LTD.(SUPRA) CONCLUDED THAT THE CONTROVERSY IS NO LONGER RES INT EGRA AND REJECTED THE VIEW CONVASSED ON BEHALF OF THE REVENUE IN THE LIGHT OF DECISION OF THE HONBLE KERALA HIGH COURT IN CIT V. DYNAMIC ORTHOPEDICS P. LTD. [2002] 257 ITR 446 AS WELL AS MALAYALA MANORAMA AND THE MADHYA PRADESH HIGH COURT IN THE CASE OF CIT V. VANDANA ROLLING MILLS LTD. [1998] 23 4 ITR 693 THAT FOR THE PURPOSES OF SECTION 115J OF THE ACT DEPRECIATION C OULD NOT BE CALCULATED AS PER THE PROVISIONS OF THE INCOME-TAX RULES. 5.2 HOWEVER IN A RECENT DECISION DATED 16.2.2 010 IN DYNAMIC ORTHOPEDICS P. LTD.(SUPRA) HONBLE APEX COURT REFERRED THE MATT ER TO A LARGER BENCH IN THE FOLLOWING TERMS: 7. IN OUR VIEW WITH RESPECT THE JUDGMENT OF THIS COURT IN MALAYALA MANORAMA CO. LTD. VS. CIT (SUPRA) NEEDS RECONSIDERA TION FOR THE FOLLOWING REASONS : CHAPTER XII-B OF THE ACT CONTAINING 'SPECIAL PROVIS IONS RELATING TO CERTAIN COMPANIES' WAS INTRODUCED IN THE IT ACT 1961 BY T HE FINANCE ACT 1987 ITA NO.265/AHD/2008 -6- W.E.F. 1ST APRIL 1988. IN FACT S.115J REPLACED S. 80VVA OF THE ACT. SEC. 115J (AS IT STOOD AT THE RELEVANT TIME) INTER ALIA PRO VIDED THAT WHERE THE TOTAL INCOME OF A COMPANY AS COMPUTED UNDER THE ACT IN R ESPECT OF ANY ACCOUNTING YEAR WAS LESS THAN THIRTY PERCENT OF IT S BOOK PROFIT AS DEFINED IN THE EXPLANATION THE TOTAL INCOME OF THE COMPANY C HARGEABLE TO TAX SHALL BE DEEMED TO BE AN AMOUNT EQUAL TO THIRTY PER CENT OF SUCH BOOK PROFIT. THE WHOLE PURPOSE OF S. 115J OF THE ACT THEREFORE WAS TO TAKE CARE OF THE PHENOMENON OF PROSPEROUS ZERO TAX COMPANIES NOT P AYING TAXES THOUGH THEY CONTINUED TO EARN PROFITS AND DECLARE DIVIDEND S. THEREFORE A MAT WAS SOUGHT TO BE IMPOSED ON ZERO TAX COMPANIES. SEC. 115J OF THE ACT IMPOSES TAX ON A DEEMED INCOME. SEC. 115J OF THE ACT IS A S PECIAL PROVISION RELATING ONLY TO CERTAIN COMPANIES. THE SAID SECTION DOES NO T MAKE ANY DISTINCTION BETWEEN PUBLIC AND PRIVATE LIMITED COMPANIES. IN OU R VIEW S. 115J OF THE ACT LEGISLATIVELY ONLY INCORPORATES PROVISIONS OF PARTS II AND III OF SCH. VI TO 1956 ACT. SUCH INCORPORATION IS BY A DEEMING FICTION. HE NCE WE NEED TO READ S. 115J(1A) OF THE ACT IN THE STRICT SENSE. IF WE SO R EAD IT IS CLEAR THAT BY LEGISLATIVE INCORPORATION ONLY PARTS II AND III OF SCH. VI TO 1956 ACT HAVE BEEN INCORPORATED LEGISLATIVELY INTO S. 115J OF THE ACT. THEREFORE THE QUESTION OF APPLICABILITY OF PARTS II AND III OF SCH. VI TO 195 6 ACT DOES NOT ARISE. IF A COMPANY IS A MAT COMPANY THEN BE IT A PRIVATE LIMI TED COMPANY OR A PUBLIC LIMITED COMPANY FOR THE PURPOSES OF S. 115J OF THE ACT THE ASSESSEE- COMPANY HAS TO PREPARE ITS P&L A/C IN ACCORDANCE WI TH PARTS II AND III OF SCH. VI TO 1956 ACT ALONE. IF WITH RESPECT THE JUDGMEN T OF THIS COURT IN MALAYALA MANORAMA CO. LTD. (SUPRA) IS TO BE ACCEPTED THEN T HE VERY PURPOSE OF ENACTING S. 115J OF THE ACT WOULD STAND DEFEATED P ARTICULARLY WHEN THE SAID SECTION DOES NOT MAKE ANY DISTINCTION BETWEEN PUBLI C AND PRIVATE LIMITED COMPANIES. IT NEEDS TO BE REITERATED THAT ONCE A C OMPANY FALLS WITHIN THE AMBIT OF IT BEING A MAT COMPANY S. 115J OF THE ACT APPLIES AND UNDER THAT SECTION SUCH AN ASSESSEE-COMPANY WAS REQUIRED TO P REPARE ITS P&L A/C ONLY IN TERMS OF PARTS II AND III OF SCH. VI TO 1956 ACT . THE REASON BEING THAT RATES OF DEPRECIATION IN R. 5 OF THE IT RULES 1962 ARE DIFFERENT FROM THE RATES SPECIFIED IN SCH. XIV OF 1956 ACT. IN FACT BY THE COMPANIES (AMENDMENT) ACT 1988 THE LINKAGE BETWEEN THE TWO HAS BEEN EXP RESSLY DELINKED. HENCE WHAT IS INCORPORATED IN S. 115J IS ONLY SCH. VI AND NOT S. 205 OR S. 350 OR S. 355. THIS WAS THE VIEW OF THE KERALA HIGH COURT IN THE CASE OF CIT VS. MALAYALA MANORAMA CO. LTD. (SUPRA) WHICH HAS BEEN WRONGLY REVERSED BY THIS COURT IN THE CASE OF MALAYALA MANORAMA CO. LTD . VS. CIT (SUPRA). 8. FOR THE AFORESTATED REASONS THE REGISTRY IS DIR ECTED TO PLACE THIS CIVIL APPEAL BEFORE THE LEARNED CHIEF JUSTICE FOR APPROPR IATE DIRECTIONS AS WE ARE OF THE VIEW THAT THE MATTER NEEDS RECONSIDERATION BY A LARGER BENCH OF THIS COURT. 5.3 THE LD. AR ALSO RELIED UPON A DECISION OF T HE HONBLE MADRAS HIGH COURT IN TIDEL PARK LTD.(SUPRA) WHICH WAS RENDERED ON 13.7.2009 . IN THIS ITA NO.265/AHD/2008 -7- DECISION ALSO THE HONBLE MADRAS HIGH COURT FOLLO WED THE AFORESAID DECISION OF HONBLE SUPREME COURT IN APOLLO TYRES LTD.(SUPR A). SINCE THIS DECISION WAS RENDERED PRIOR TO THE AFORESAID DECISION OF T HE HONBLE APEX COURT IN DYNAMIC ORTHOPEDICS P. LTD.(SUPRA) APPARENTLY THE VIEWS EXPRESSED THEREIN WERE NOT CONSIDERED BY THE HONBLE MADRAS HIGH COUR T. 5.4 THE PROVISIONS OF SEC. 115JA STIPULATE THAT THE DEPRECIATION SHALL BE CALCULATED ON THE SAME METHOD AND RATES WHILE PREPA RING THE PROFIT AND LOSS ACCOUNT BOTH FOR LAYING BEFORE THE COMPANY AT ITS A NNUAL GENERAL MEETING UNDER THE COMPANIES ACT AS WELL AS FOR THE PURPOSE OF SECTION 115JA OF THE ACT. IN THIS CONNECTION THE RELEVANT PROVISIONS OF SEC. 115JA OF THE ACT READ AS UNDER: (2) EVERY ASSESSEE BEING A COMPANY SHALL FOR TH E PURPOSES OF THIS SECTION PREPARE ITS PROFIT AND LOSS ACCOUNT FOR THE RELEVANT PREVIOUS YEAR IN ACCORDANCE WITH THE PROVISIONS OF PARTS II AND III OF SCHEDULE VI TO THE COMPANIES ACT 1956 (1 OF 1956): PROVIDED THAT WHILE PREPARING PROFIT AND LOSS ACCOU NT THE DEPRECIATION SHALL BE CALCULATED ON THE SAME METHOD AND RATES WHICH HAVE BEEN ADOPTED FOR CALCULATING THE DEPRECI ATION FOR THE PURPOSE OF PREPARING THE PROFIT AND LOSS ACCOUNT LA ID BEFORE THE COMPANY AT ITS ANNUAL GENERAL MEETING IN ACCORDANCE WITH THE PROVISIONS OF SECTION 210 OF THE COMPANIES ACT 195 6 (1 OF 1956): PROVIDED FURTHER THAT WHERE A COMPANY HAS ADOPTED O R ADOPTS THE FINANCIAL YEAR UNDER THE COMPANIES ACT 1956 (1 OF 1956) WHICH IS DIFFERENT FROM THE PREVIOUS YEAR UNDER THE ACT THE METHOD AND RATES FOR CALCULATION OF DEPRECIATION SHALL CORRESP OND TO THE METHOD AND RATES WHICH HAVE BEEN ADOPTED FOR CALCULATING T HE DEPRECIATION FOR SUCH FINANCIAL YEAR OR PART OF SUCH FINANCIAL Y EAR FALLING WITHIN THE RELEVANT PREVIOUS YEAR. 5.5 IN THE INSTANT CASE THE ITAT VIDE THEIR O RDER DATED 4.8.2006 DIRECTED THE LD. CIT(A) FOR PROPER APPRECIATION AND CONSIDER ATION OF CLAUSE (III) OF EXPLANATION TO SEC. 115JA(2) OF THE ACT AND THEREA FTER ADJUDICATE THE ISSUE IN ACCORDANCE LAW. AFTER CONSIDERING THE TOTALITY OF F ACTS AND CIRCUMSTANCES OF THE INSTANT CASE WE FIND THAT THE LD. CIT(A) DID NOT APPRECIATE THE FACTS AND CIRCUMSTANCES IN THE PROPER PERSPECTIVE NOR HAD T HE BENEFIT OF THE VIEWS ITA NO.265/AHD/2008 -8- TAKEN IN THE AFORESAID DECISIONS . AS OBSERVED BY T HE HONBLE APEX COURT IN DYNAMIC ORTHOPEDICS P. LTD.(SUPRA) ONCE A COMPANY FALLS WITHIN THE AMBIT OF IT BEING A MAT COMPANY S. 115JA OF THE ACT APPLIES AND UNDER THAT SECTION SUCH AN ASSESSEE-COMPANY WAS REQUIRED TO PREPARE IT S P&L A/C ONLY IN TERMS OF PARTS II AND III OF SCH. VI TO 1956 ACT. THE REA SON BEING THAT RATES OF DEPRECIATION IN R. 5 OF THE IT RULES 1962 ARE DIF FERENT FROM THE RATES SPECIFIED IN SCH. XIV OF 1956 ACT. IN FACT BY THE COMPANIES (AMENDMENT) ACT 1988 THE LINKAGE BETWEEN THE TWO HAS BEEN EXPRESSLY DELI NKED AND WHAT IS INCORPORATED IN S. 115JA OF THE ACT IS ONLY SCH. V I AND NOT S. 205 OR S. 350 OR S. 355. IN THESE CIRCUMSTANCES WE CONSIDER IT FA IR AND APPROPRIATE TO SET ASIDE THE ORDER OF THE LD. CIT(A) AND RESTORE THE I SSUE RAISED IN GROUND NO.1 IN THE APPEAL TO HIS FILE FOR DECIDING THE ISSUE AFRESH IN ACCORDANCE WITH LAW IN THE LIGHT OF OUR AFORESAID OBSERVATIONS AS ALSO VARIOUS DECISIONS INCLUDING THOSE REFERRED TO ABOVE AND OF COURSE AFTER ALLOWI NG SUFFICIENT OPPORTUNITY TO BOTH THE PARTIES. NEEDLESS TO SAY THAT WHILE REDECI DING THE APPEAL THE LEARNED CIT(A) SHALL PASS A SPEAKING ORDER KEEPING IN MIND INTER ALIA THE MANDATE OF PROVISIONS OF SEC. 250(6) OF THE ACT. WITH THESE OB SERVATIONS GROUND NO. 1 IN THE APPEAL IS DISPOSED OF. 6. NO ADDITIONAL GROUND HAVING BEEN RAISED BEFOR E US IN TERMS OF RESIDUARY GROUND NO.2 IN THE APPEAL ACCORDINGLY THIS GROUND IS DISMISSED. 7. NO OTHER PLEA OR ARGUMENTS WAS MADE BEFORE US . ITA NO.265/AHD/2008 -9- 8. IN THE RESULT APPEAL IS ALLOWED BUT FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON 29 TH JULY 2011 SD/- S D/- (D.K. TYAGI) JUDICIAL MEMBER (A.N. PAHUJA) ACCOUNTANT MEMBER PLACE : AHMEDABAD DATED : 29-07-2011 COPY OF THE ORDER FORWARDED TO: 1) : VITRAG DYEING & PRINTING MILLS PRIVATE LIMITED 201 ANAND MARKET RING ROAD SURAT 2) : ACIT CIRCLE-4 SURAT. 3) : CIT(A)-1 SURAT 4) : CIT CONCERNED 5) : DR ITAT . BENCH AHMEDABAD BY ORDER DR/AR ITAT AHMEDABAD