Thursday, May 15, 2008


In a recent ruling, the Supreme Court has said that while calculating book profits under MAT provisions, no adjustment can be made to the depreciation provided in the books of accounts as per the rates provided under the income-tax rules, even if these rates are higher than those prescribed under the company law. In this case, the assessee prepared profit and loss account by debiting depreciation at the rates prescribed by the I-T rules. The assessing officer was of the view that while calculating book profit under MAT provision, assessee is obliged to work out profit after charging depreciation as per the schedules of the Companies Act and is not allowed to debit the depreciation as per the I-T Rules. The Supreme Court applied the ratio laid down in judgment of Apollo Tyres, wherein it was held that the AO does not have the jurisdiction to go behind the net profit shown in the profit and loss account except to the extent provided in the explanation to Section 115-J. On this ground, it allowed the assessee’s claim to deduct depreciation as per IT Rules while computing book
profit for MAT.


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