SREE AYYANAR SPINNING & WEAVING M.LTD. vs COMMNR. OF INCOME TAX

The Supreme Court examined the applicability of Section 254(2) of the Income Tax Act, 1961 in the context of a dispute regarding the computation of taxable income for the assessment year 1989-90. The Court held that the Assessing Officer is bound by the book profits computed in accordance with the Companies Act, 1956, as established in Apollo Tyres Ltd. Vs. C.I.T. (225 ITR 273). However, it distinguished the facts of the present case from Apollo Tyres, noting that the change in depreciation method was relevant to the assessment, thus allowing the Department's reworking of the computation to stand.