Sree Ayyanar Spinning & Weaving M.Ltd vs Commissioner Of Income Tax

JUDGMENT 1 IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO.3246 OF 2008 (Arising out of SLP(C) No. 10576 of 2007) SREE AYYANAR SPINNING & WEAVING M.LTD. ...APPELLANT (S) VERSUS COMMISSIONER OF INCOME TAX ...RESPONDENT(S) ORDER Leave granted.

For the Assessment Year 1989-90, assessment under Section 143(3) was framed by the Deputy Commissioner of Income Tax, Madurai, wherein the said authority determined the taxable total income for 21 months ending 31st March, 1989 at Rs.45,92,240/-. This order was passed on 27th February, 1992. The determination of the taxable total income was based on Section 115J of the Act. In the said assessment order the total income of the assessee was computed at Rs. 42,98,019/- and on scrutiny of the said computation and the balance-sheet along with the return the Deputy Commissioner of Income Tax reworked the computation as indicated at page 63 of Volume II in this case. Suffice it to state that the total profit was reworked at Rs.1,53,07,444/-. Thirty per cent thereof was reworked at Rs.45,92,239/-. In the process of reworking the computation under 2 Section 115J, the Deputy Commissioner added to the profit the excess depreciation which was debited in the profit and loss account in view of the difference which arose due to the change in the method of accounting adopted by the assessee for the claim of depreciation on machinery retrospectively from the year ending 30th June, 1983. The assessee had changed its method of claiming depreciation from Straight Line Method (SLM) to Written Down Value Method and in that connection it was argued by the assessee that the profit stood computed correctly in accordance with the provisions of the Companies Act, 1956 and, therefore, relying on the judgment of this Court in the case of Apollo Tyres Ltd. Vs. C.I.T. (225 ITR

By the impugned judgment the High Court came to the conclusion that under Section 254(2) the Tribunal could not have allowed rectification beyond four years. That, the Tribunal had no power to rectify the mistake after four years which time is set out in Section 254(2) itself for passing an order of rectification either suo motu or an application filed either by the assessee or by the Assessing Officer. The High Court did not go into the merits of the case. The High Court allowed the appeal and set aside the order of the Tribunal only on the ground of limitation. Hence, this Civil Appeal by Special Leave.

For the aforesated reasons, we set aside the impugned judgment of the High Court and restore T.C.(A) No. 2/2004 on the file of the Madras High Court for fresh decision on the merits of the matter as indicated hereinabove. All contentions on merits are expressly kept open. We express no opinion on the merits of the case whether rectification application was at all maintainable or not and whether the judgment in the case of Apollo Tyres was or was not applicable to the facts of this case. That question will have to be gone into by the High court in the above T.C.(A) No. 2/2004.

Accordingly, the Civil Appeal filed by the assessee stands allowed with no order as to costs.