A. K. Patnaik, J. — This is a Reference under section 256 (1) of the Income Tax Act, 1961, for short, the Act, 1961). 2. The facts as stated in the statement of the case prepared by the Income Tax Appellate Tribunal, Guwahati Bench, are as follows: “that the assessee for the purpose of section 115J of the Income Tax Act computed the book profit at nil, for it adjusted Rs. 7,63,729 the aggregate depreciation for the previous years ended on 3.9.85,31.3.87 and 31.3.88. According to the Assessing Officer, the computation was not in accordance with law because the assessee did not make provision for depreciation in the books of accounts for the assessment years 1986-87 to 1988-89. As per the provisions of section 115 J read with clause (b) of the first proviso to section 205 (1) of the Companies Act, 1956, the assessee was not entitled to set off of the depreciation unless the provision was made. The Assessing Officer, therefore, computed the book profit for the purpose of section 115 J of the Income tax Act at Rs. 3,04,188 and accordingly added in the total income of the assessee the sum of Rs. 91,256 being 30% of Rs. 3,04,188. On first appeal the learned Commissioner of Income Tax (Appeals) reversed the order of the Assessing Officer and directed him to adjust the brought forward depreciation of earlier years against net profit computed in view of the provision of the Companies Act, 1956. 4. Aggrieved, the Revenue came in appeal before the Tribunal and the Tribunal a having followed its earlier decisions in Apollo Tyers Ltd vs. DCIT (Cochin Bench: 43 ITD 464); Modern Woolens Ltd vs. DCIT (Bombay Bench : 47 ITD 154) and Bombay Tyres International Ltd vs. DCIT (Bombay Bench: 51 ITD 339) upheld the order of the learned Commissioner of Income Tax (Appeals). The Tribunal in view of the provisions of section 205 of the Companies Act read with Explanation 2 to section 115 J held that the assessee is entitled to adjust the brought forward depreciation of the earlier years against the book profit computed for the purpose of section 115J." On these facts as stated by the Income Tax Appellate Tribunal, the following question of law has been referred to for our opinion: "Whether, on the facts and in the circumstances of the case, the Tribunal was justified in upholding CIT (Appeal's) order directing the Assessing Officer to adjust brought forward depreciation of earlier years against the book profit computed for the purpose of section 115J when such depreciation was not provided in books of account of the assessee during the earlier previous years." 3. Mr. KP Sarma, learned counsel appearing for the Income Tax Department, submitted that it will be clear from a plain reading of section 115J of the Act, 1961, and in particular clause (iv) of the Explanation thereto, and Part n of the j Schedule VI to the Companies Act, 1956, which provides requirements as to profit and loss account, that a provision has to be made for depreciation in the profit and loss account of a company, and if no provision is made for depreciation in the profit and loss account of the company, the fact that no provision has been made shall be stated and the quantum of arrears of depreciation computed in accordance with section 205 (2) of the Companies Act, 1956, shall be disclosed e by way of a note. Mr. Sarma submitted that in the present case, no provision was made for depreciation in the profit and loss accounts of the assessee-company in the previous year relating to the assessment years 1986-87 to 1988-89 and in the profit and loss accounts of the assessee-company in the previous years relating to the assessment year 1989-90 the quantum of arrears of depreciation computed in accordance with section 205 (2) of the Companies Act, 1956, had not been / disclosed by way of a note. He argued that since the relief under section 115 J of the Act, 1961, could only be allowed if the amount of arrear depreciation was computed and disclosed in the note as required under the provisions of section 205 read with Part n of Schedule VI to the Companies Act, 1956, the assessee in this case was not allowed set off of the quantum of arrears of depreciation for the previous years under section 115 J of the Act, 1961. 4. Mr. RK Joshi, learned counsel appearing for the assessee, on the other hand, submitted that it will be clear from the finding of the Commissioner of Income Tax (Appeals) that although no provision was made for depreciation in the profit and loss account of the assessee-company, a note had been given that no such provision has been made in the profit and loss account and the said note also included the quantum of arrears of depreciation for the years in question. According to Mr. Joshi, therefore, the requirement of section 115J of the Act, 1961, and clause (iv) of the Explanation thereto, and section 205 read with Part n of Schedule VI to the Companies Act, 1956, had been met and the assessee-a Company was entitled to adjust the brought forward depreciation of earlier years against book profit for the purpose of section 115 J of the Act, 1961. Mr. Joshi relied on the decision of the Kerala High Court in CIT vs. Appollo Tyers Ltd, (1999) 237 ITR 706, in support of his aforesaid submission. 5. Sub-sections (1) and (1 A) of section 115 J and the relevant portion of the Explanation to section 115J of the Act. Mr. Joshi relied on the decision of the Kerala High Court in CIT vs. Appollo Tyers Ltd, (1999) 237 ITR 706, in support of his aforesaid submission. 5. Sub-sections (1) and (1 A) of section 115 J and the relevant portion of the Explanation to section 115J of the Act. 1961, as they stood on 1.4.1989 are quoted herein below: "(1) Notwithstanding anything contained in any oilier provision of this Act, where in the case of an assessee being a company (other than a company engaged in the business of generation or distribution of electricity) the total income, as computed under this Act in respect of any previous year relevant to the assessment year commencing on or after the 1st day of April, 1988 (but before the 1st day of April, 1991) (herein after in this Section referred to as the relevant previous year), is less than thirty percent of its book profit, the total income of such assessee chargeable to tax for the relevant previous year shall be deemed to be an amount equal to thirty percent of such book profit. (1A) Every assessee, being a company, shall, for the purposes of this section, prepare its profit and loss account for the relevant previous year in accordance with the provisions of Parts II and HI of Schedule VI to the Companies Act, 1956 (1 of 1956). Explanation - For the purposes of this section 'book profit' means the net profit as shown in the profit and loss account for the relevant previous year prepared under sub-section (1 A),... as reduced by - (iv) the amount of the loss or the amount of depreciation which would be required to be set off against the profit of the relevant previous year as if the provisions of clause (b) of the first proviso to sub-section (1) of section 205 of the Companies Act, 1956 (1 of 1956) are applicable." It will be clear from sub-section (1 A) of section 115 J of the Act, 1961, that where the assessee is a company, it has to prepare its profit and loss account for the relevant previous year in accordance with the provisions of Parts II and III of Schedule VI to the Companies Act, 1956. The portion of Explanation to section 115 of the Act, 1961, quoted above further stipulates that for the purpose of the section the book profit would mean net profit as shown in the profit and loss account as reduced by the amount of depreciation which would be required to be set off against the profit of the relevant previous year as if the provisions of clause (b) of the first proviso to sub-section (1) of section 205 of the Companies Act, 1956, are applicable. Clause (b) of the first proviso to sub-section (1) of section 205 of the Companies Act provides that if the company has incurred any loss in any previous financial year or years, then the amount of loss or an amount which is equal to the amount provided for depreciation for that year or those years whichever is less, shall be set off against the profits of the company for the year for which dividend is proposed to be declared or paid or against the profit of the company for any previous financial year or years, arrived at in both the cases after providing for depreciation in accordance with the provisions of sub-section (2) of section 205 of the Companies Act, 1956, or against both. Part n of Schedule VI to the Companies Act is titled - "Requirements as to profit and loss account". Para 3 (iv) of Part n of Schedule VI which is relevant for the purpose of this reference is quoted herein below: "(iv)...If no provision is made for depreciation, the fact that no provision has been made shall be stated and the quantum of arrears of depreciation computed in accordance with section 205 (2) of the Act shall be disclosed by way of a note." From a joint reading of the aforesaid provisions of the Income Tax Act, 1961 and the Companies Act, 1956, for the purpose of relief under section 115 J of the Act, 1961, carry forward and set off of depreciation for previous years against the net profit of a subsequent year can be allowed only if the quantum of such arrears of depreciation computed in accordance with section 205 (2) of the Companies Act, 1956, is disclosed by way of a note, and not otherwise. 6. So far as the present reference is concerned, while Mr. 6. So far as the present reference is concerned, while Mr. Sarma, learned counsel for the Department states that the statement of facts as well as the findings recorded by the Tribunal do not show that such quantum of depreciation for the earlier years was computed in accordance with section 205 (2) of the Companies Act, 1956, and was disclosed by way of a note, Mr. Joshi, learned counsel for the assessee-company submitted that the Tribunal has upheld the order of the Commissioner of Income Tax (Appeals), and the Commissioner of Income Tax (Appeals) has stated that in the note the depreciation which was not provided, in the books of accounts has been quantified and noted. From the order of the Commissioner of Income Tax (Appeals) as well as the order of Tribunal, we do not find that any such clear finding as to whether or not the quantum of arrears of depreciation for the assessment years 1986-87 to 1988-89 as computed in accordance with section 205 (2) of the Companies Act, 1956, was disclosed by way of a note in the profit and loss account of the previous years relevant to the assessment years 1986-87 to 1988-89 of the previous year relevant to assessment year 1989-90. In the light of the answer given by us to the question referred to, the Tribunal will now hear the parties and record its finding on the basis of the materials available before it. 7. The reference is disposed of accordingly.