Law:

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Section 115J of the Income-tax Act, 1961 - Zero-tax companies - Assessment year 1990-91 - Whether if a company is a MAT company, then be it a private limited company or a public limited company, for purposes of section 115J, it has to prepare its profit and loss account in accordance with Parts II and III of Schedule VI to Companies Act, 1956 alone - Held, yes - Whether, however, since in Malayala Manorama Co. Ltd. v. CIT [2008]300 ITR 251/ 169 Taxman 471, Supreme Court had taken a different view, matter needed reconsideration by a larger Bench - Held, yes FACTS For the relevant assessment year, the assessee-company filed its return claiming depreciation rates specified in rule 5 of the Income-tax Rules, 1962. While completing the assessment, the Assessing Officer recomputed the book profit for the purpose of section 115J after allowing depreciation as per Schedule XIV to the Companies Act. As the rates of depreciation specified in Schedule XIV were lower than the rates specified under rule 5, the assessee took up the matter before the Commissioner (Appeals) who held that the assessee being a private limited company, section 350 of the 1956 Act was not applicable to it and, in the circumstances, the Assessing Officer had erred in providing depreciation at the rates specified under Schedule XIV to the 1956 Act. Consequently, the Commissioner (Appeals) held that the assessee was right in providing depreciation in its account as per rule 5. The Tribunal dismissed the revenue's appeal. On further appeal, the High Court held that the Assessing Officer was right in directing the assessee to provide for depreciation at the rate specified in Schedule XIV to the 1956 Act and not in terms of rule 5. On appeal to the Supreme Court : HELD The view of the High Court was similar to the view taken by it in the case of CIT v. Malayala Manorama Co. Ltd. [2002] 253 ITR 378 / 120 Taxman 343 (Ker.), which stood reversed by the of the Supreme Court in the case of Malayala Manorama Co. Ltd. v. CIT [2008] 300 ITR 251/ 169 Taxman 471 . The of the Supreme Court in Malayala Manorama Co. Ltd.'s case (supra ) needs reconsideration for the following reasons : Chapter XII-B containing…

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