ACIT, Bangalore V. M/s Hemavathy Power and Lighting Pvt. Ltd., Bangalore

ITA 1648/BANG/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 68308 (ITAT-BANGALORE)
• Duration Of Justice: 7 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-08-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 20-12-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JACINTA ZIMIK VASHAI
• Assessee Lawyers: S RAMASUBRAMANIAN
• Keywords: Business income; Depreciation; Unabsorbed depreciation
• Section: 115JB; 12; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI N. BARATHVAJA SANKAR, VICE PRESIDENT AND SHRI N.V. VASUDEVAN, JUDICIAL MEMBER ITA NO. 1648/BANG/2012 ASSESSMENT YEAR : 2009-10 THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 11(4), BANGALORE. VS. M/S. HEMAVATHY POWER & LIGHTING PVT. LTD., UNIT NO.905 & 906, PRESTIGE MERIDIAN II, BANGALORE 560 066. PAN: AABCH 1245E APPELLANT RESPONDENT APPELLANT BY : SMT. JACINTA ZIMIK VASHAI, ADDL. CIT(DR) RESPONDENT BY : SHRI S. RAMASUBRAMANIAN, C.A. DATE OF HEARING : 05.08.2013 DATE OF PRONOUNCEMENT : 14.08.2013 O R D E R PER N.V. VASUDEVAN, JUDICIAL MEMBER THIS APPEAL BY THE REVENUE IS AGAINST THE ORDER DA TED 18.09.2012 OF THE CIT(APPEALS)-I, BANGALORE RELATING TO ASSESSMEN T YEAR 2009-10. 2. THE GROUNDS OF APPEAL RAISED BY THE REVENUE REA D AS FOLLOWS:- ITA NO.1648/BANG/2012 PAGE 2 OF 11 1. THE ORDER OF THE LEARNED CIT(APPEALS), IN SO F AR AS IT IS PREJUDICIAL TO THE INTEREST OF REVENUE, IS OPPOSED TO LAW AND THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE LEARNED CIT(APPEALS) WAS NOT JUSTIFIED IN D IRECTING THE ASSESSING OFFICER TO DELETE THE ADDITION MADE I N THE COMPUTATION OF BOOK PROFITS. 3. THE LEARNED CIT(APPEALS) ERRED IN HOLDING THAT THE ASSESSING OFFICER CANNOT MAKE ANY ADDITION BY DISTU RBING THE PROFIT AND LOSS ACCOUNT PREPARED IN ACCORDANCE WITH THE COMPANIES ACT IN VIEW OF THE DECISION OF THE APEX C OURT IN APPOLLO TYRES LTD 174 CTR 521. 4. THE LEARNED CIT(APPEALS) ERRED IN LAW IN NOT CO NSIDERING THAT THE PROVISIONS OF CLAUSE (G) OF EXPLANATION 1 TO SECTION 115JB PROVIDES TO INCREASE THE NET PROFIT BY THE AM OUNT OF DEPRECIATION DEBITED TO THE PROFIT AND LOSS ACCOUNT AND THAT UNDER THE PROVISIONS OF CLAUSE (IIA) OF THE EXPLANATION, REDUCTION CAN BE MADE OF THE DEPRECIATION EXCLUDING THE DEPRECIATION ON ACCOUNT OF REVALUATION OF ASSETS. 5. THE LEARNED CIT(APPEALS) ERRED IN NOT APPRECIAT ING THAT DEPRECIATION ON GOODWILL IS IN THE NATURE OF REVALU ATION OF ASSETS. 6. FOR THESE AND SUCH OTHER GROUNDS THAT MAY BE UR GED AT THE TIME OF HEARING, IT IS HUMBLY PRAYED THAT THE ORDER OF THE CIT (A) BE REVERSED IN SO FAR AS THE ISSUE OF COMPUTATION O F INCOME UNDER SECTION 115JB IS CONCERNED AND THAT OF THE ASSESSIN G OFFICER BE RESTORED. 7. THE APPELLANT CRAVES LEAVE TO ADD, TO ALTER, TO AMEND OR TO DELETE ANY OF THE GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING OF THE APPEAL. 3. THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINE SS OF GENERATION OF HYDRO-ELECTRICITY. IN THE COURSE OF ASSESSMENT PROCEEDINGS FOR THE A.Y. 2009-10, THE ASSESSING OFFICER NOTICED THAT THE ASS ESSEE HAD CLAIMED DEPRECIATION OF RS.79,87,701 ON GOODWILL. THE AO T OOK THE VIEW THAT ITA NO.1648/BANG/2012 PAGE 3 OF 11 GOODWILL IS NOT A DEPRECIABLE ASSET AND THEREFORE I S NOT AN INTANGIBLE ASSET AS DEFINED IN SECTION 2(11)(B) OF THE INCOME-TAX AC T, 1961 [HEREINAFTER REFERRED TO AS 'THE ACT']. THE AO ALSO REFERRED T O THE PROVISIONS OF SECTION 32(1) OF THE ACT, WHEREIN DEPRECIATION HAS TO BE AL LOWED ON KNOW-HOW, PATENTS, COPYRIGHTS, TRADE MARKS, LICENCES, FRANCHI SES OR ANY OTHER BUSINESS OR COMMERCIAL RIGHTS OF A SIMILAR NATURE BEING INTA NGIBLE ASSETS. THE AO HELD THAT GOODWILL CANNOT BE SAID TO BE FALLING WIT HIN ANY OF RIGHTS CONTEMPLATED U/S. 32(1) OF THE ACT. THE AO ACCORDIN GLY REJECTED THE CLAIM OF THE ASSESSEE FOR DEDUCTION ON ACCOUNT OF DEPRECI ATION ON GOODWILL. 4. SINCE THE ASSESSEE WAS A COMPANY, THE PROVISIONS OF SECTION 115JB OF THE ACT WERE APPLICABLE. AS PER THOSE PROVISION S, IN THE CASE OF AN ASSESSEE WHO IS A COMPANY, IF THE TAX PAYABLE ON TH E TOTAL INCOME AS COMPUTED UNDER THE NORMAL PROVISIONS OF THE ACT IN RESPECT OF ANY PREVIOUS YEAR IS LESS THAN 10% OF ITS BOOK PROFITS, SUCH BOO K PROFITS SHALL BE DEEMED TO BE THE TOTAL INCOME OF THE ASSESSEE AND TAX PAYA BLE BY THE ASSESSEE ON SUCH TOTAL INCOME SHALL BE THE AMOUNT OF INCOME TAX @ 10%. FOR THE PURPOSE OF THE ABOVE PROVISIONS, BOOK PROFIT HAS BEEN DEFINED IN EXPLANATION (1) OF THE ACT. SINCE THE TOTAL INCOME COMPUTED UNDER THE NORMAL PROVISIONS OF THE ACT WAS LESS THAN 10% OF T HE BOOK PROFITS AS PER SECTION 115JB OF THE ACT, THE AO COMPUTED THE TOTAL INCOME AND TAX PAYABLE U/S. 115JB OF THE ACT. THERE IS NO DISPUTE ON THE POSITION THAT SECTION 115JB IS ATTRACTED IN THE CASE OF THE ASSES SEE. THE DISPUTE IS WITH REGARD TO THE MANNER IN WHICH THE BOOK PROFITS WERE COMPUTED U/S. 115JB ITA NO.1648/BANG/2012 PAGE 4 OF 11 OF THE ACT. TO APPRECIATE THE CONTROVERSY, IT IS NECESSARY TO REPRODUCE THE PROVISIONS OF SECTION 115JB OF THE ACT, THE SAME RE ADS AS UNDER:- 115JB. SPECIAL PROVISION FOR PAYMENT OF TAX BY CER TAIN COMPANIES.-(1) NOTWITHSTANDING ANYTHING CONTAINED I N ANY OTHER PROVISION OF THIS ACT, WHERE IN THE CASE OF AN ASSE SSEE, BEING A COMPANY, THE INCOME-TAX, PAYABLE ON THE TOTAL INCOM E AS COMPUTED UNDER THIS ACT IN RESPECT OF ANY PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR COMMENCING ON OR AFTER THE 1 ST DAY OF APRIL, 2012, IS LESS THAN EIGHTEEN AND ONE-HALF PER CENT OF ITS BOOK PROFIT, SUCH BOOK PROFIT SHALL BE DEEMED TO BE THE TOTAL INCOME OF THE ASSESSEE AND THE TAX PAYABLE BY THE ASSESSEE ON SUCH TOTAL INCOME SHALL BE THE AMOUNT OF INCOME-TAX AT THE RAT E OF EIGHTEEN AND ONE-HALF PER CENT. (2) EVERY ASSESSEE,-, (A) BEING A COMPANY, OTHER THAN A COMPANY REFERRED TO IN CLAUSE (B), 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 OF SCHEDULE VI TO TH E COMPANIES ACT, 1956 (1 OF 1956); OR (B) BEING A COMPANY, TO WHICH THE PROVISO TO SUB-S ECTION (2) OF SECTION 211 OF THE COMPANIES ACT, 1956 (1 OF 195 6) IS APPLICABLE, SHALL, FOR THE PURPOSES OF THIS SECTION , PREPARE ITS PROFIT AND LOSS ACCOUNT FOR THE RELEVANT PREVIOUS Y EAR IN ACCORDANCE WITH THE PROVISIONS OF THE ACT GOVERNING SUCH COMPANY:' PROVIDED THAT WHILE PREPARING THE ANNUAL ACCOUNTS I NCLUDING PROFIT AND LOSS ACCOUNT,- (I) THE ACCOUNTING POLICIES; (II) THE ACCOUNTING STANDARDS FOLLOWED FOR PREPARI NG SUCH ACCOUNTS INCLUDING PROFIT AND LOSS ACCOUNT; (III) THE METHOD AND RATES ADOPTED FOR CALCULATING THE DEPRECIATION, ITA NO.1648/BANG/2012 PAGE 5 OF 11 SHALL BE THE SAME AS HAVE BEEN ADOPTED FOR THE PURP OSE OF PREPARING SUCH ACCOUNTS INCLUDING PROFIT AND LOSS A CCOUNT AND LAID BEFORE THE COMPANY AT ITS ANNUAL GENERAL MEETI NG IN ACCORDANCE WITH THE PROVISIONS OF SECTION 210 OF TH E COMPANIES ACT, 1956 (1 OF 1956): PROVIDED FURTHER THAT WHERE THE COMPANY HAS ADOPTED OR ADOPTS THE FINANCIAL YEAR UNDER THE COMPANIES ACT, 1956 (1 OF 1956), WHICH IS DIFFERENT FROM THE PREVIOUS YEAR UNDER THI S ACT,- (I) THE ACCOUNTING POLICIES; (II) THE ACCOUNTING STANDARDS ADOPTED FOR PREPARIN G SUCH ACCOUNTS INCLUDING PROFIT AND LOSS ACCOUNT; (III) THE METHOD AND RATES ADOPTED FOR CALCULATING THE DEPRECIATION, SHALL CORRESPOND TO THE ACCOUNTING POLICIES, ACCOUN TING STANDARDS AND THE METHOD AND RATES FOR CALCULATING THE DEPREC IATION WHICH HAVE BEEN ADOPTED FOR PREPARING SUCH ACCOUNTS INCLU DING PROFIT AND LOSS ACCOUNT FOR SUCH FINANCIAL YEAR OR PART OF SUCH FINANCIAL YEAR FALLING WITHIN THE RELEVANT PREVIOUS YEAR. EXPLANATION 1 : FOR THE PURPOSES OF THIS SECTION, 'BOOK PROFIT' MEANS THE NET PROFIT AS SHOWN IN THE PROFIT AND LOS S ACCOUNT FOR THE RELEVANT PREVIOUS YEAR PREPARED UNDER SUB-SECTI ON (2), AS INCREASED BY- (A) THE AMOUNT OF INCOME-TAX PAID OR PAYABLE, AND THE PROVISION THEREFOR; OR (B) THE AMOUNTS CARRIED TO ANY RESERVES, BY WHATEV ER NAME CALLED, OTHER THAN A RESERVE SPECIFIED UNDER SECTIO N 33AC; OR (C) THE AMOUNT OR AMOUNTS SET ASIDE TO PROVISIONS MADE FOR MEETING LIABILITIES, OTHER THAN ASCERTAINED LIABILI TIES; OR (D) THE AMOUNT BY WAY OF PROVISION FOR LOSSES OF S UBSIDIARY COMPANIES; OR (E) THE AMOUNT OR AMOUNTS OF DIVIDENDS PAID OR PRO POSED; OR ITA NO.1648/BANG/2012 PAGE 6 OF 11 (F) THE AMOUNT OR AMOUNTS OF EXPENDITURE RELATABLE TO ANY INCOME TO WHICH SECTION 10 [OTHER THAN THE PROVISIO NS CONTAINED IN CLAUSE (38) THEREOF OR SECTION 11 OR SECTION 12 APPLY; OR] (G) THE AMOUNT OF DEPRECIATION, (H) THE AMOUNT OF DEFERRED TAX AND THE PROVISION T HEREFOR, (I) THE AMOUNT OR AMOUNTS SET ASIDE AS PROVISION F OR DIMINUTION IN THE VALUE OF ANY ASSET, (J) THE AMOUNT STANDING IN REVALUATION RESERVE REL ATING TO REVALUED ASSET ON THE RETIREMENT OR DISPOSAL OF SUC H ASSET, IF ANY AMOUNT REFERRED TO IN CLAUSES (A) TO (I) IS DEBITED TO THE PROFIT AND LOSS ACCOUNT OR IF ANY AMOUNT REFERRED T O IN CLAUSE (J) IS NOT CREDITED TO THE PROFIT AND LOSS ACCOUNT, AND AS REDUCED BY,- (I) THE AMOUNT WITHDRAWN FROM ANY RESERVE OR PROVI SION (EXCLUDING A RESERVE CREATED BEFORE THE 1ST DAY OF APRIL, 1997 OTHERWISE THAN BY WAY OF A DEBIT TO THE PROFIT AND LOSS ACCOUNT), IF ANY SUCH AMOUNT IS CREDITED TO THE PROFIT AND LOSS ACCOUNT: PROVIDED THAT WHERE THIS SECTION IS APPLICABLE TO A N ASSESSEE IN ANY PREVIOUS YEAR, THE AMOUNT WITHDRAWN FROM RESERV ES CREATED OR PROVISIONS MADE IN A PREVIOUS YEAR RELEVANT TO T HE ASSESSMENT YEAR COMMENCING ON OR AFTER THE 1ST DAY OF APRIL, 1 997 SHALL NOT BE REDUCED FROM THE BOOK PROFIT UNLESS THE BOOK PRO FIT OF SUCH YEAR HAS BEEN INCREASED BY THOSE RESERVES OR PROVIS IONS (OUT OF WHICH THE SAID AMOUNT WAS WITHDRAWN) UNDER THIS EXP LANATION OR EXPLANATION BELOW SECOND PROVISO TO SECTION 115JA, AS THE CASE MAY BE; OR (II) THE AMOUNT OF INCOME TO WHICH ANY OF THE PROV ISIONS OF SECTION 10 OTHER THAN THE PROVISIONS CONTAINED IN C LAUSE (38) THEREOF OR * * * * SECTION 11 OR SECTION 12 APPLY, IF ANY SUCH AMOUNT IS CREDITED TO THE PROFIT AND LOSS ACCOUNT; OR. (IIA) THE AMOUNT OF DEPRECIATION DEBITED TO THE PR OFIT AND LOSS ACCOUNT (EXCLUDING THE DEPRECIATION ON ACCOUNT OF R EVALUATION OF ASSETS); OR (IIB) THE AMOUNT WITHDRAWN FROM REVALUATION RESERV E AND CREDITED TO THE PROFIT AND LOSS ACCOUNT, TO THE EXT ENT IT DOES NOT ITA NO.1648/BANG/2012 PAGE 7 OF 11 EXCEED THE AMOUNT OF DEPRECIATION ON ACCOUNT OF REV ALUATION OF ASSETS REFERRED TO IN CLAUSE (IIA); OR] (III) THE AMOUNT OF LOSS BROUGHT FORWARD OR UNABSO RBED DEPRECIATION, WHICHEVER IS LESS AS PER BOOKS OF ACC OUNT. EXPLANATION : FOR THE PURPOSES OF THIS CLAUSE,- (A) THE LOSS SHALL NOT INCLUDE DEPRECIATION; (B) THE PROVISIONS OF THIS CLAUSE SHALL NOT APPLY IF THE AMOUNT OF LOSS BROUGHT FORWARD OR UNABSORBED DEPRECIATION, IS NIL; OR (VII) THE AMOUNT OF PROFITS OF SICK INDUSTRIAL COM PANY FOR THE ASSESSMENT YEAR COMMENCING ON AND FROM THE ASSESSME NT YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH THE SAID COM PANY HAS BECOME A SICK INDUSTRIAL COMPANY UNDER SUB-SECTION (1) OF SECTION 17 OF THE SICK INDUSTRIAL COMPANIES (SPECIA L PROVISIONS) ACT, 1985 (1 OF 1986), AND ENDING WITH THE ASSESSME NT YEAR DURING WHICH THE ENTIRE NET WORTH OF SUCH COMPANY B ECOMES EQUAL TO OR EXCEEDS THE ACCUMULATED LOSSES. EXPLANATION : FOR THE PURPOSES OF THIS CLAUSE, 'NET WORTH' SHALL HAVE THE MEANING ASSIGNED TO IT IN CLAUSE (GA) OF S UB-SECTION (1) OF SECTION 3 OF THE SICK INDUSTRIAL COMPANIES (SPEC IAL PROVISIONS) ACT, 1985 (1 OF 1986). (VIII) THE AMOUNT OF DEFERRED TAX, IF ANY SUCH AMO UNT IS CREDITED TO THE PROFIT AND LOSS ACCOUNT. 5. IT CAN BE SEEN THAT EXPLANATION (1) TO SECTION 1 15JB(2) OF THE ACT DEFINES BOOK PROFITS TO MEAN THE NET PROFIT AS SH OWN IN THE PROFIT & LOSS ACCOUNT FOR THE RELEVANT PREVIOUS YEAR PREPARED BY A COMPANY IN ACCORDANCE WITH THE PROVISIONS OF THE COMPANIES ACT , 1956. SUCH NET PROFIT, AS PER EXPLANATION (1) CLAUSE (G), SHOULD B E INCREASED BY AN AMOUNT OF DEPRECIATION WHICH IS DEBITED TO THE PROFIT & LO SS ACCOUNT. ITA NO.1648/BANG/2012 PAGE 8 OF 11 6. THE AO RELYING ON THE AFORESAID PROVISIONS REDUC ED DEPRECIATION ON GOODWILL WHILE COMPUTING BOOK PROFITS U/S. 115JB. THE COMPUTATION DONE BY THE AO WAS AS FOLLOWS:- COMPUTATION OF INCOME BUSINESS INCOME AS PER COMPUTATION : 7,62,15,912 ADD: DEPRECIATION CLAIMED ON GOODWILL : 79,87, 701 ---------------- BUSINESS INCOME 8,42,03,613 INCOME FROM OTHER SOURCES A) INTEREST ON IT REFUND : 71,622 B) INTEREST FROM SHORT TERM DEPOSIT : 48,76,312 --------------- GROSS TOTAL INCOME 8,91,51,547 LESS: 80 G : 27,500 80 IA : 8,42,03,613 --------------- TOTAL INCOME : 49,20,434 TAX @30% : 14,76,129 - (A) BOOK PROFIT AS PER 111 5JB : 6,48,40,889 ADD: DEPRECIATION ON GOODWILL : 79,87,590 ---------------- 7,28,28,590 TAX @ 10% : 72,82,859 - (B) TAX PAYABLE (HIGHER OF A OR B) : 72,82,859. 7. THE ASSESSEE CHALLENGED THE ACTION OF THE AO IN ADDING BACK DEPRECIATION ON GOODWILL WHILE COMPUTING BOOK PROFI TS U/S. 115JB OF THE ACT. THE ASSESSEE IN PARTICULAR POINTED OUT THAT UNDER E XPLANATION (1) AFTER CLAUSES (A) TO (J), THERE IS A REFERENCE TO CERTAIN AMOUNTS WHICH HAVE TO BE ITA NO.1648/BANG/2012 PAGE 9 OF 11 AGAIN REDUCED WHILE COMPUTING BOOK PROFITS. THE AS SESSEE POINTED OUT THAT CLAUSE (IIA) THEREIN PROVIDES THAT THE AMOUNT OF DEPRECIATION DEBITED TO PROFIT AND LOSS ACCOUNT (EXCLUDING DEPRECIATION ON ACCOUNT OF REVALUATION OF ASSETS) SHOULD AGAIN BE ADDED BACK. THE ASSESSEE THEREFORE POINTED OUT THAT DEPRECIATION ON GOODWILL WHICH IS ADDED UNDER EXPLANATION (1) CLAUSE (G) HAS TO BE AGAIN REDUCED AS PER THE PROVISIONS R EFERRED TO ABOVE. 8. THE CIT(APPEALS) ON A CONSIDERATION OF THE ABOVE SUBMISSIONS HELD AS FOLLOW:- 3.5 THE APPELLANT HAS RAISED GROUND NO.4 RELATIN G TO THE ADDITION OF RS.79,87,590/- BEING DEPRECIATION ON GO ODWILL TO THE BOOK PROFITS COMPUTED U/S 115JB OF THE ACT. THE AO MADE THIS ADDITION ON THE GROUND THAT HE IS EMPOWERED TO MAKE ADJUSTMENT IN THE BOOK PROFITS BY LIFTING THE CORPORATE VEIL W HERE THERE IS EVASION OF TAX. THE ISSUE HERE IS SIMPLE I.E. TO EX AMINE WHETHER THE APPELLANT PREPARED THEIR PROFIT AND LOSS ACCOUN T FOR THE PERIOD UNDER CONSIDERATION IN ACCORDANCE WITH THE PROVISIO NS OF PARTS II AND III OF SCHEDULE VI OF THE COMPANIES ACT 1956. U NDER THE COMPANY LAW THE DEPRECIATION ON GOODWILL IS ALLOWAB LE WHILE PREPARING THE PROFIT AND LOSS ACCOUNT. THERE IS NO MATERIAL ALSO ON RECORD TO SHOW THAT THERE WAS ANY FAILURE ON THE PA RT OF THE APPELLANT IN THE PREPARATION OF THE PROFIT AND LOSS ACCOUNT UNDER THE COMPANIES ACT 1956 MENTIONED ABOVE. THEREFORE, THE AO CANNOT MAKE ANY ADDITION IN THIS REGARD BY DISTURBI NG THE PROFIT AND LOSS ACCOUNT PREPARED BY THE ASSESSEE IN ACCORD ANCE WITH THE PROVISIONS OF THE COMPANIES ACT 1956 IN VIEW OF THE DECISION OF THE APEX COURT IN THE CASE OF APPOLLO TYRES LTD. (1 74 CTR 521). THEREFORE, THE APPELLANT SUCCEEDS IN RESPECT OF GRO UND NO.4 AND THE AO IS DIRECTED TO DELETE THIS ADDITION MADE IN THE COMPUTATION OF BOOK PROFITS U/S 115JB OF THE ACT. 9. AGGRIEVED BY THE ORDER OF THE CIT(APPEALS), THE REVENUE HAS PREFERRED THE PRESENT APPEAL BEFORE THE TRIBUNAL. ITA NO.1648/BANG/2012 PAGE 10 OF 11 10. WE HAVE HEARD THE SUBMISSIONS OF THE LD. DR, WH O REITERATED THE STAND OF THE REVENUE BY RELYING ON THE PROVISIONS O F EXPLANATION 1(G) TO SECTION 115JB OF THE ACT. THE LD. COUNSEL FOR THE ASSESSEE POINTED OUT THAT IN GROUND NO.4, THE REVENUE HAS RAISED THE ISS UE THAT DEPRECIATION OF GOODWILL HAS ARISEN ON ACCOUNT OF REVALUATION OF AS SETS. ACCORDING TO HIM, THIS WAS NEVER THE CASE MADE OUT EITHER BEFORE THE AO OR IN THE PROCEEDINGS BEFORE THE CIT(A) AND THAT THERE WAS NO FACTUAL BASIS TO RAISE THE AFORESAID GROUND BY THE REVENUE. IT WAS ALSO S UBMITTED THAT GOODWILL HAS ARISEN BECAUSE OF ACQUISITION OF CERTAIN BUSINE SS BY THE ASSESSEE AND NOT OWING TO ANY REVALUATION OF ASSETS. 11. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. IT I S CLEAR FROM THE PROVISIONS OF THE ACT, REFERRED TO EARLIER, THAT D EPRECIATION WHICH IS TO BE ADDED TO THE NET PROFIT AS PER THE PROFIT & LOSS AC COUNT PREPARED IN ACCORDANCE WITH THE PART II OF SCHEDULE VI TO THE C OMPANIES ACT, 1956 IN TERMS OF EXPLANATION 1 (G) TO SECTION 115JB(2) HAS TO BE REDUCED AS PER CLAUSE (IIA) BELOW CLAUSE (A) TO (J) OF EXPLANATION (1) TO SUB-SECTION (2) OF SECTION 115JB OF THE ACT. SUCH REDUCTION NEED NOT BE MADE IF DEPRECIATION DEBITED IN THE PROFIT & LOSS ACCOUNT IS ON ACCOUNT OF REVALUATION OF ASSETS. AS RIGHTLY CONTENDED ON BEHALF OF THE ASSESSEE, THI S WAS NEVER THE CASE MADE OUT BY THE AO OR BEFORE THE CIT(A). AS RIGHTL Y CONTENDED ON BEHALF OF ASSESSEE, THERE IS NO FACTUAL BASIS FOR THE REVE NUE TO RAISE GROUND NO.4 IN THE FORM IN WHICH IT HAS BEEN RAISED BEFORE THE TRIBUNAL. IN THE ITA NO.1648/BANG/2012 PAGE 11 OF 11 CIRCUMSTANCES, WE ARE OF THE VIEW THAT DEPRECIATION IN QUESTION HAS TO BE REDUCED FROM THE BOOK PROFITS AS PER THE PROVISIONS REFERRED TO EARLIER. 12. FOR THE REASONS GIVEN ABOVE, WE CONFIRM THE ORD ER OF THE CIT(A) AND DISMISS THE APPEAL OF THE REVENUE. 13. IN THE RESULT, THE APPEAL BY THE REVENUE IS DISMISSED . PRONOUNCED IN THE OPEN COURT ON THIS 14 TH DAY OF AUGUST, 2013. SD/- SD/- ( N. BARATHVAJA SANKAR ) ( N.V. VASU DEVAN ) VICE PRESIDENT JUDIC IAL MEMBER BANGALORE, DATED, THE 14 TH AUGUST, 2013. /D S/ COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR/ SENIOR PRIVATE SECRETARY ITAT, BANGALORE.