Case Law Details
Amount withdrawn from revaluation reserve and credited to the Profit & Loss account cannot be reduced from the book profit if such amount had not increased the book profit at the time of creation of reserve
Facts
• The taxpayer is a limited company engaged in the business of manufacture of yarn and polyester.
• The taxpayer during the assessment year (“AY”) 2000-01 revalued its fixed assets by increasing the net book value by INR 2885.8 million and credited the said sum to the revaluation reserve.
• In the subsequent year i.e. AY 2001-02, the taxpayer debited to the Profit & Loss account an amount of INR 1275.7 million towards depreciation. In accordance with Accounting Standard-10 and Accounting Standard-6, the tax payer transferred INR 261.2 million from revaluation reserve and set it off against the depreciation resulting in a net depreciation allowance of INR 1014.5 million.
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