S.H. Kapadia, J. - (1.) A short question which arises for determination in this civil appeal is - whether the Income Tax Appellate Tribunal was, on the facts and circumstances of this case, justified in upholding the order of the Commissioner of Income Tax (Appeals) directing the Assessing Officer to allow the claim of depreciation as per the Income Tax Rules, 1962, for the purposes of computing the book profit under Section 115J of the Income Tax Act, 1961
(2.) In this civil appeal, we are concerned with Assessment Year 1990-1991.
(3.) The appellant-assessee is a private limited cfxompany engaged in the manufacture and sale of Orthopaedic appliances. In the Return of Income filed, the assessee returned an income of Rs. 1,50,730/-. In the Profit and Loss Account, depreciation was provided at the rates specified in Rule 5 of the Income Tax Rules, 1962 ['Rules', for short]. While completing the assessment of income, the Assessing Officer re-computed the book profit for the purpose of Section 115J of the Income Tax Act, 1961, ['Act', for short], after allowing depreciation as per Schedule XIV to the Companies Act. The rates of depreciation specified in Schedule XIV to the Companies Act, 1956 ['1956 Act', for short] were lower than the rates specified under Rule 5 of the Rules. Being aggrieved by the assessment order, the assessee took up the matter before the Commissioner of Income Tax [Appeals] ['C.I.T. (A)', for short], who came to the conclusion that the assessee was a private limited company. It was not a subsidiary of a public company. Therefore, placing reliance on Section 355 of 1956 Act, the C.I.T. (A) held that Section 350 of 1956 Act was not applicable to the assessee and, in the circumstances, the Income Tax Officer had erred in providing depreciation at the rates specified under Schedule XIV to 1956 Act. Consequently, the C.I.T.(A) held that the assessee was right in providing depreciation in its accounts as per Rule 5 of the Rules. Aggrieved by the decision of the C.I.T.(A), I.T.A. No. 115 of 1993 was preferred by the Department to the Income Tax Appellate Tribunal ['Tribunal', for short]. By judgement and order dated 13th January, 1999, the Tribunal held that, since the assessee was a private limited company, Section 349 and Section 350 were not applicable to the facts of the case and, in the circumstances, the Income Tax Officer had erred in directing the assessee, which was a private limited company, to provide for depreciation as per Schedule XIV to 1956 Act, which was not applicable to the private limited companies [See Section 355 of 1956 Act]. Consequently, the appeal filed by the Department before the Tribunal stood dismissed.;