Companies Act Case Law Malayala Manorama Co. Ltd Vs Commissioner of Income Tax,Trivandrum

CASE NO.:
Appeal (civil) 5420-5423 of 2002

PETITIONER:
Malayala Manorama Co. Ltd.

RESPONDENT:
Commissioner of Income Tax,Trivandrum

DATE OF JUDGMENT: 10/04/2008

BENCH:
Ashok Bhan & Dalveer Bhandari

JUDGMENT:
J U D G M E N T
Dalveer Bhandari, J.
These appeals are directed against the judgment
passed by a Division Bench of the Kerala High Court at
Ernakulam on 13th November, 2001 whereby the High
Court has decided Income Tax Reference Nos.245, 259,
289 and 293 of 1999 by a common judgment.

The main question which arose for consideration
before the Court below was:
Whether in respect of a company
consistently charging depreciation in its
books of account at the rates prescribed in
the Income-tax Rules, the Income Tax
Officer has jurisdiction under section 115J
of the Income Tax Act, 1961 to rework net
profits by substituting the rates prescribed
in Schedule XIV of the Companies Act,
1956?

The concept of a minimum tax on zero tax
companies was introduced under section 80VVA of the
Income Tax Act, 1961 (hereinafter referred to as the
1961 Act) when a ceiling was placed on allowances by
the Finance Act, 1983 with effect from the Assessment
Year 1984-85. However, the allowances unabsorbed,
because of the restriction imposed by the ceiling, were
carried forward, so that they could be absorbed in a
later year, if adequate profits are available. Section
80VVA was dropped from the statute by the Finance
Act, 1987, with effect from A.Y. 1988-89, when
replaced Book Profits Tax by section 115J of the 1961
Act. But it was materially different in one respect that
no part of the tax on book profits could be adjusted
against tax on regular assessment at a future date.

It may be pertinent to mention that the Book
Profit Tax was abandoned with effect from A.Y.
1990-91 by the Finance Act, 1990. It was re-
introduced with a new name Minimum Alternate Tax
with effect from A.Y. 1997-98 under section 115JA.

For ready reference, we deem it appropriate to
reproduce section 115J of the 1961 Act as under:
115-J. Special provisions relating to
certain companies. (1) Notwithstanding
anything contained in any other provision of
this Act, where in the case of an assessee
being a company other than a company
engaged in the business of generation or
distribution of electricity, the total income,
as computed under this Act in respect of
any previous year relevant to the
assessment year commencing on or after the
1st day of April, 1988 but before the 1st day
of April, 1991 (hereafter in this section
referred to as the relevant previous year) is
less than thirty per cent of its book profit,
the total income of such assessee chargeable
to tax for the relevant previous year shall be
deemed to be an amount equal to thirty per
cent of such book profit.

(1-A) Every assessee, being a company,
shall, for the 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).

Explanation.For the purposes of this
section, book profit means the net profit as
shown in the profit and loss account for the
relevant previous year prepared under sub-
section (1-A), as increased by
(a) the amount of income tax paid or
payable, and the provision
therefor; or
(b) the amounts carried to any
reserves other than the reserves
specified in Section 80-HHD or
sub-section (1) of Section 33-AC,
by whatever name called; or
(c) the amount or amounts set aside
to provisions made for meeting
liabilities other than ascertained
liabilities; or
(d) the amount by way of provision
for losses of subsidiary
companies; or
(e) the amount or amounts of
dividends paid or proposed; or
(f) the amount or amounts of
expenditure relatable to any
income to which any of the
provisions of Chapter III applies;
or
(g) the amount withdrawn from the
reserve account under Section
80-HHD, where it has been
utilised for any purpose other
than those referred to in sub-
section (4) of that section; or
(h) the amount credited to the
reserve account under Section
80-HHD, to the extent that
amount has not been utilised
within the period specified in sub-
section (4) of that section;
(ha) the amount deemed to be the
profits under sub-section (3) of
Section 33-AC;
if any amount referred to in clauses (a) to (f)
is debited or, as the case may be, the
amount referred to in clauses (g) and (h) is
not credited to the profit and loss account,
and as reduced by,
(i) the amount withdrawn from
reserves other than the reserves
specified in Section 80-HHD or
provisions, if any such amount is
credited to the profit and loss
account:
Provided that, where this
section is applicable to an
assessee in any previous year
(including the relevant previous
year), the amount withdrawn from
reserves created or provisions
made in a previous year relevant
to the assessment year
commencing on or after the 1st
day of April, 1988 shall not be
reduced from the book profit
unless the book profit of such
year has been increased by those
reserves or provisions (out of
which the said amount was
withdrawn) under this
Explanation; or
(ii) the amount of income to which
any of the provisions of Chapter
III applies, if any such amount is
credited to the profit and loss
account; or
(iii) the amounts as arrived at after
increasing the net profit by the
amounts referred to in clauses (a)
to (f) and reducing the net profit
by the amounts referred to in
clauses (i) and (ii) attributable to
the business, the profits from
which are eligible for deduction
under Section 80-HHC or Section
80-HHD; so, however, that such
amounts are computed in the
manner specified in sub-section
(3) or sub-section (3-A) of Section
80-HHC or sub-section (3) of
Section 80-HHD, as the case may
be; or
(iv) the amount of the loss or the
amount of depreciation which
would be required to be set off
against the profit of the relevant
previous year as if the provisions
of clause (b) of the first proviso to
sub-section (1) of Section 205 of
the Companies Act, 1956 (1 of
1956), are applicable.
(2) Nothing contained in sub-section (1)
shall affect the determination of the
amounts in relation to the relevant previous
year to be carried forward to the subsequent
year or years under the provisions of sub-
section (2) of Section 32 or sub-section (3) of
Section 32-A or clause (ii) of sub-section (1)
of Section 72 or Section 73 or Section 74 or
sub-section (3) of Section 74-A or sub-
section (3) of Section 80-J.

A new Chapter XII-B containing section 115J was
inserted by the Finance Act, 1987 with effect from Ist
April, 1988. This new section made provisions for levy
of minimum tax on book profits of certain companies.
The scope and effect of these provisions have been
elaborated in the following portion of the departmental
circular No.495, dated 22nd September, 1987:-
“New provisions to levy minimum tax on
“book profit” of certain companies:
36.1 It is an accepted cannon of taxation to
levy tax on the basis of ability to pay.
However, as a result of various tax
concessions and incentives certain
companies making huge profits and also
declaring substantial dividends, have been
managing their affairs in such a way as to
avoid payment of income-tax.
36.2 Accordingly, as a measure of equity,
section 115J has been introduced by the
Finance Act. By virtue of the new provisions,
in the case of a company whose total income
as computed under the provisions of the
Income-tax Act is less then 30% of the book
profit computed under the section, the total
income chargeable to tax will be 30 % of the
book profit as computed. For the purposes
of section 115J, book profits will be the net
profit as shown in the profit and loss
account prepared in accordance with the
provisions of Schedule VI to the Companies
Act, 1956, after certain adjustments. The
net profit as above will be increased by
income-tax paid or payable or the provisions
thereof, amount carried to any reserve,
provision made for liabilities other than
ascertained liabilities, provision for losses of
subsidiary companies, etc., if the amounts
are debited to the profit and loss account.
Liabilities relating to expenditure which has
been incurred or which has accrued in
respect of expenses which are otherwise
deductible in computing income will not be
added back. The amount so arrived at is to
be reduced by-
(i) amounts withdrawn from
reserves, if any such amount is
credited to the profit and loss
account;
(ii) the amount of income to which
any of the provisions of Chapter
III applies, if any such amount is
credited to the profit and loss
account; and
(iii) the amount of any brought
forward losses or unabsorbed
depreciation whichever is less as
computed under the provisions of
section 205(1)(b) of the
Companies Act, 1956, for the
purposes of declaration of
dividends. Section 205 of the
Companies Act requires every
company desirous of declaring
dividend to provide for
depreciation for the relevant
accounting year. Further, the
company is required under
section 205 to set off against the
profit of the relevant accounting
year, the depreciation debited to
the profit and loss account of any
earlier year(s) or loss whichever is
less.
36.3 Section 115J, therefore, involves two
processes. Firstly, an assessing authority
has to determine the income of the company
under the provisions of the Income-tax Act.
Secondly, the book profit is to be worked out
in accordance with the Explanation to
section 115J(1) and it is to be seen whether
the income determined under the first
process is less than 30 per cent of the book
profit. Section 115J would be invoked if the
income determined under the first process is
less than 30 per cent of the book profit.

The whole purpose of section 115J was to tax a
company which had no taxable income, but showed a
book profit. For instance, a company which adopted
the method of straight-line depreciation (as it is
entitled to do under the Companies Act, 1956
(hereinafter referred to as the 1956 Act), or a
company which had not debited to its profit and loss
account, the capital expenditure on scientific research
and development which is fully deductible under
section 35 of the 1961 Act would be assessed to tax
under this section.

It was submitted on behalf of the appellant that
in the profit & loss account the assessee has debited
depreciation at the rates prescribed by the Income-tax
Rules, 1962. This has been the consistent practice of
the assessee throughout. Section 211(2) of the 1956
Act mandates that every profit and loss account of a
company shall give a true and fair view of the profit or
loss of the company for the financial year and shall
comply with the requirements of Parts-II of Schedule
VI so far as they are applicable thereto. The accounts
of the assessee for the relevant assessment years
1988-89 and 1989-90 are audited under section 227 of
the 1956 Act. The audit report confirms that the
accounts of the assessee represent a true and fair
view. The accounts have further been passed and
approved by the general body of shareholders at the
Annual General Meeting. The said accounts have been
filed with the Registrar of Companies and no objections
have been raised in relation to them.
It was further submitted that under section 115J
the assessee has the obligation to prepare his profit
and loss account as per Parts-II and III of Schedule VI
to the 1956 Act. No dispute has been raised at any
stage of the proceedings by the revenue that the profit
& loss account of the assessee is not in compliance
with the provisions of the 1956 Act, particularly
Schedule VI, Parts II and III. In Schedule VI, there is
no reference to sections 205 and 350 or Schedule XIV
to the 1956 Act.
The appellant referred to Note 3 (iv) to Part II
(Requirements as to profit and loss account) of
Schedule VI to the 1956 Act which reads as under:
The amount provided for depreciation,
renewals or diminution in value of fixed
assets.

If such provision is not made by means of a
depreciation charge, the method adopted for
making such provision.

If no provision is made for depreciation, the
fact that no provision has been made shall
be stated and the quantum of arrears of
depreciation computed in accordance with
section 205(2) of the Act shall be disclosed
by way of a note.

This makes it clear that Schedule VI to the 1956 Act
does not create any obligation on a company to provide
for any depreciation much less provides for
depreciation as per Schedule XIV to the Act.
It was also submitted by the appellant that it is a
long-standing accepted position by the Company Law
department that the rates of depreciation prescribed in
Schedule XIV are the minimum rates (See: Circular
No.2 of 1989 dated 7th March, 1989). Paragraph 1 of
the said Circular reads as under:
1. Can higher rates of depreciation be
charged? – It is stated that Schedule XIV
clearly states that a company should
disclose depreciation rates if they are
different from the principal rates specified in
the Schedule. On this basis, it is suggested
that a company can charge depreciation at
rates which are lower or higher than those
specified in Schedule XIV.

It may be clarified that the rates as
contained in Schedule XIV should be viewed
as the minimum rates and, therefore, a
company shall not be permitted to charge
depreciation at rates lower than those
specified in the Schedule in relation to
assets purchased after the date of
applicability of the Schedule.

Moreover, note 5 of Schedule XIV contemplates that
rates may be different from the rates specified in the
said Schedule. This note reads as under:
5. The following information should also
be disclosed in the accounts:

(i) depreciation methods used; and

(ii) depreciation rates or the useful lives of
the assets, if they are different from the
principal rates, specified in the
Schedule.

It was submitted by the learned counsel on behalf
of the appellant that this case is squarely covered by a
three-Judge Bench decision of this Court in Apollo
Tyres Ltd. etc. v. Commissioner of Income Tax,
Kochi etc. (2002) 9 SCC 1. In this view of the matter,
we deem it proper to examine the Apollo Tyress case
in detail.
In Apollo Tyres (supra), this Court examined the
object of introducing section 115J in the 1961 Act.
The Court relied on the budget speech of the then
Honble Finance Minister of India made in the
Parliament while introducing the said section. The
relevant portion of the speech is reproduced as under:
It is only fair and proper that the
prosperous should pay at least some tax.
The phenomenon of so-called zero-tax
highly profitable companies deserves
attention. In 1983, a new Section 80-VVA
was inserted in the Act so that all profitable
companies pay some tax. This does not
seem to have helped and is being
withdrawn. I now propose to introduce a
provision whereby every company will have
to pay a minimum corporate tax on the
profits declared by it in its own accounts.
Under this new provision, a company will
pay tax on at least 30% of its book profit. In
other words, a domestic widely held
company will pay tax of at least 15% of its
book profit. This measure will yield a
revenue gain of approximately Rs.75 crores.

The Court held that the purpose of introducing this
section was that the Income Tax Authorities were
unable to bring certain companies within the net of
income tax because these companies were adjusting
their accounts in such a manner as to attract no tax or
very little tax. It is with a view to bring such of these
companies within the tax net that section 115J was
introduced in the 1961 Act with a deeming provision
which makes the company liable to pay tax on at least
30% of its book profits as shown in its own account.
For the said purpose, section 115J makes the income
reflected in the companies books of accounts as the
deemed income for the purpose of assessing the tax. If
we examine the said provision in the above
background, we notice that the use of the words in
accordance with the provisions of Parts II and III of
Schedule VI to the Companies Act was made for the
limited purpose of empowering the assessing authority
to rely upon the authentic statement of accounts of the
company. While so looking into the accounts of the
company, an Assessing Officer under the Income Tax
Act has to accept the authenticity of the accounts with
reference to the provisions of the Companies Act which
obligates the company to maintain its account in a
manner provided by the Companies Act and the same
to be scrutinized and certified by statutory auditors
and will have to be approved by the company in its
general meeting and thereafter to be filed before the
Registrar of Companies who has a statutory obligation
also to examine and satisfy that the accounts of the
company are maintained in accordance with the
requirements of the Companies Act. In spite of all
these procedures contemplated under the provisions of
the Companies Act, the Court observed that it is
difficult to accept the argument of the Revenue that it
is still open to the Assessing Officer to rescrutinize this
account and satisfy himself that these accounts have
been maintained in accordance with the provisions of
the Companies Act. The Court categorically held that:

The Assessing Officer while computing
the income under Section 115-J has only
the power of examining whether the books of
account are certified by the authorities
under the Companies Act as having been
properly maintained in accordance with the
Companies Act. The Assessing Officer
thereafter has the limited power of making
increases and reductions as provided for in
the Explanation to the said section. To put it
differently, 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 provided in the
Explanation to Section 115-J.
Mr. Joseph Vellapally, learned senior counsel
appearing on behalf of the appellant reiterated that
this case is fully covered by detailed reasoning given by
this Court in the case of Apollo Tyres. He further
submitted that the reasoning of this case has been
accepted in a large number of judgments of the High
Courts.

Mr. Vellapally placed reliance on a division bench
judgment of the Punjab & Haryana High Court in
Commissioner of Income Tax v. Sona Woolen Mills
Pvt. Ltd. (2007) 160 Taxman 22 and submitted that in
this case also the assessee had provided for
depreciation in its profit & loss account by adopting
the rates prescribed in the Income-tax Rules. The
Assessing Officer claimed that the depreciation for the
purposes of section 115J was permissible as per
Schedule XIV to the Companies Act. The High Court
relying upon the decision in Apollo tyres rejected the
view taken inter alia by the Kerala High Court in
Malayala Manorama (2002) 253 ITR 378.
Mr. Vellapally also submitted that the respondent
revenue has accepted the judgment delivered by the
High Court of Punjab & Haryana in the aforesaid
judgment and did not challenge the same by filing
Special Leave Petition before this Court.

Mr. Vellapally has also drawn our attention to the
division bench judgment of the Bombay High Court in
Kinetic Motors v. Deputy Commissioner of Income
Tax (2003) 262 ITR 33 and submitted that in this case
the Bombay High Court relied on the said judgment of
Apollo Tyres and held the issue in favour of the
assessee. In this case, the Division Bench of the
Bombay High Court observed as under:
The short question that arises for
consideration in this tax appeal is whether it
is open to the Assessing Officer to make
adjustment to the book profits beyond what
is authorised by the definition given in
Explanation to Section 115J of the Income-
tax Act, if the accounts are prepared and
certified to be in accordance with Parts II
and III of Schedule VI to the Companies Act,
1956. In the case of Apollo Tyres Ltd. [2002]
255 JTR 273, the apex court held that while
computing the income under Section 115J
of the Income-tax Act, the Assessing Officer
has only power to examine whether the
books of account were certified by the
authorities under the Companies Act as
having been properly maintained in
accordance with the Companies Act. It is
further held that the Assessing Officer
thereafter has limited powers of making
increases and reductions as provided for in
the Explanation to the said section. The
apex court further held that the Assessing
Officer does not have the jurisdiction to go
beyond the net profits shown in the profit
and loss account, except to the extent
provided in the Explanation to Section 115J
of the Income-tax Act. In the instant case,
the accounts maintained by the assessee are
certified by the auditors. Under the
circumstances, the book adjustment made
by the Assessing Officer being contrary to
the decision of the apex court, question No.
1 is answered in the negative and in favour
of the assessee.
In view of our answer to question No.
1, question No. 2 becomes academic. It is
not in dispute that under the Companies
Act, 1956, both straight line method and
written down value method are recognised.
Therefore, once the amount of depreciation
actually debited to the profit and loss
account is certified by the auditors, then, as
per the decision of the apex court in the
case of Apollo Tyres Ltd. [2002] 255 ITR 273,
question No. 2 has to be answered in the
negative and in favour of the assessee.

Mr. Vellapally further placed reliance on
Commissioner of Income Tax v. Loyal Textiles Mills
Ltd. (2003) 261 ITR 307 (Madras), Commissioner of
Income Tax v. Thiroo Arooran Sugars Ltd. (2006)
152 Taxman 344 (Madras), Cochin Cadalas (P) Ltd. v.
Commissioner of Income Tax (2002) 125 Taxman 47
(Kerala) and Rajasthan Spinning & Weaving Mills v.
Deputy Commissioner of Income Tax (2006) 281 ITR
177 (Rajasthan). All these judgments have been
decided on the basis of the ratio of the decision of this
Court in Apollo Tyres (supra). He further submitted
that the respondent revenue has accepted the
decisions of the High Courts in all these cases and did
not challenge the same by filing Special Leave Petitions
before this Court.

Mr. Vikram Gulati, learned counsel appearing on
behalf of the respondent-Revenue submitted that in
the instant case three questions were raised before the
High Court, one at the instance of the Revenue and
two questions at the instance of assessee.

The question raised by the revenue was:
Whether on the facts and in the
circumstances of the case, the tribunal was
right in upholding the order of the CIT
(Appeals) directing the assessing officer to
allow the claim of depreciation as per the
Income Tax Rules for the purposes of
computing the book profit under section
115J of the Companies Act?
The questions raised by the assessee are as under:

1. Whether on the facts and in the
circumstances of the case, the tribunal
was justified in upholding the finding
of the CIT (Appeals) that the proceeding
of the assessing authority dated
09.10.2002, was a valid order under
section 154 of the Income Tax Act?

2. Whether on the facts and in the
circumstances of the case, the tribunal
was justified in law in upholding the
computation under section 115J
through the order passed on
09.10.1992?

Mr. Gulati submitted that the facts of this case
are that for the assessment years 1988-89, the
assessee filed a return declaring loss of Rs.1,12,293/-
and claimed the refund of Rs.8,62,730/- pre paid as
tax. The Deputy Commissioner of Income Tax (Asst.),
Special Range, Kottayam rejected the figures returned
by the assessee and assessed the total income at
Rs.47,26,270/- and imposed a tax of Rs.25,99,448/-
as well as a surcharge of Rs.1,29,972/- totaling
Rs.27,29,420/-. After adjusting advance tax paid, as
well as the TDS deducted, the Assessing Officer
created a total demand of Rs.26,83,327/-. It is
relevant to mention here that since the provision of
section 80VV stood deleted with effect from 01.4.1988
the claim made under that section was rejected.

It was submitted that Chapter XII-B containing
special provisions relating to certain companies was
introduced in the Income Tax Act by the Finance Act
1987 with effect from 01.4.1988. From the
assessment year 1988-89, section 115J was
introduced into the 1961 Act, which replaced section
80VV of the Act. Section 115J provided that where the
total income of a company as computed under the
Income Tax Act in respect of any accounting year was
less than 30% of its book profit, as defined in the
explanation, the total income of the company,
chargeable to tax, shall be deemed to be an amount
equal to 30% of such book profit. The whole purpose
of this section was to tax a company, which has no
taxable income, merely because it shows book profit.
Book profit as explained in this section meant the net
profit as shown in the profit and loss account for the
relevant previous year prepared under sub section (1A)
of section 115J as increased by the amounts referred
to in clauses (a) to (ha) of the Act. It should be noted
that the words prepared under sub-section (1A) were
introduced by the Finance Act, 1989, with effect from
01.4.1989.

Sub-section (1A) to section 115J reads as follows:
Every assessee, being a company,
shall, for the purposes of this section,
prepare its profit and loss account for the
relevant previous year, in accordance with
the provisions of Part II, and III of Schedule
VI to the Companies Act, 1956 (1 of 1956).

This sub-section (1A) to section 115J of the 1961
Act would have application for the A.Y. 1989-90, which
is the subject matter of ITR Nos.289 and 293 of 1999.
But would have no application to the A.Y. 1988-89,
which is the subject matter of ITR Nos.245 and 259 of
1999.

Explanation (ha) (iv) to section 115J, which would
be relevant to both assessment years 1988-89, as well
as 1989-90 and introduced w.e.f. 01.4.1989 reads as
follows:
(ha). The amount deemed to be the profits
under sub-section (3) of section 33AC:

if any amount referred to in clauses (a)
to (f) is debited or, as the case may be, the
amount referred to in clauses (g) and (h) is
not credited to the profits and loss account,
as as reduced by. 

(i) xxx xxx xxx

(ii) xxx xxx xxx

(iii) xxx xxx xxx

(iv) the amount of the loss or the
amount of depreciation which would be
required to be set off against the profit of the
relevant previous year as if the provisions of
clause (b) of the first proviso to sub-section
(1) of section 205 of the Companies Act,
1956 (1 of 1956) are applicable.
Mr. Gulati further submitted that before the High
Court, it was argued by counsel for the revenue that
section 205 of the Companies Act, 1956 has been
legislatively incorporated into the Income Tax Act for
the purposes of section 115J and since this is a
legislation by incorporation, the said provision of the
Companies Act, 1956 has to be applied as indicated by
that provision in the Companies Act. It was also
pointed out that in section 205 of the Companies Act,
it has been provided that for the purposes of
calculating depreciation under section 205(1), the
same could be provided to the extent specified under
section 350 of the Companies Act. A reference to
section 350 of the Companies Act would show that the
amount of depreciation to be deducted shall be the
amount, calculated with reference to the written down
value of the assets, as shown by the books of the
company at the end of the financial year expiring at
the commencement of the Act or immediately
thereafter and at the end of each subsequent financial
year and the rates specified in Schedule XIV to the
Companies Act. Therefore, according to the revenue,
the calculation of depreciation in terms of the
Companies Act and Schedule XIV thereof becomes a
must, while assessing an assessee under section 115J
of the Income Tax Act.

Mr. Gulati further submitted that the question
raised in the case of Sona Woolen Mills Pvt. Ltd.
(supra) shows that the assessee was trying to claim
depreciation as per Income Tax Rules on the ground
that the same was based on the views expressed by the
then chairman of the CBDT in a departmental
publication. It is clear that the views expressed by the
Chairman of the CBDT cannot override the Act and
have clearly to be rejected in case they are not
consistent with the Act. He submitted that the Kerala
High Court in Commissioner of Income Tax v.
Dynamic Orthopaedics Pvt. Ltd. (2002) 257 ITR 446
as well as Malayala Manorama (supra) and the M.P.
High Court in the case of Commissioner of Income
Tax v. Vandana Rolling Mills Ltd. (1998) 234 ITR
693 have all held that for the purposes of section 115J
of the Act, depreciation could not be calculated as per
provisions of the Income Tax Rules. Only the Gujarat
High Court in the case of Deputy Commissioner of
Income Tax v. Vardhman Fabrics (P) Ltd. (2002) 254
ITR 431 has upheld the view that the circular of the
Company Law Board laid down only minimum
depreciation for the purposes of distribution of the
dividend and the company could decide to give a
higher depreciation. Mr. Gulati also contended that
the Punjab & Haryana High Court has preferred to
follow the minority view and has ignored the majority
view taken by two High Courts, namely the Kerala
High Court as well as the M.P. High Court.

Mr. Gulati also relied upon the case of J.K.
Industries Ltd. v. Union of India (2008) 297 ITR 176
(SC). On proper analysis of the said case, we find that
this case also does not help the Revenue.

We have heard the learned counsel for the parties
at length and carefully perused the written
submissions filed by them. In our considered opinion,
the controversy involved in this case is no longer res
integra. A three Judge Bench of this Court in Apollo
Tyres (supra) has clearly interpreted section 115J of
the 1961 Act. There is no scope for any further
discussion.

Consequently, the appeals are allowed and the
impugned order of the High Court is accordingly set
aside. In the facts and circumstances of the case, we
direct the parties to bear their own costs.

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