Jadavbhai R.Patel, Bhavnagar vs Department Of Income Tax
5.41 As regards the decision in the case of J.K. Industries Limited and
another(supra) relied upon by the ld. AR , we find that the said decision is not
relevant to the facts and circumstances of the case under consideration. In that
decision, issue was as to whether the Central Government has power to adopt
accounting standards by framing the rules and making them mandatory for the
purpose the Companies Act,1956? Hon'ble Apex Court held that Accounting
Standard 22, which is made mandatory, provides an internal legitimate aid to the
meaning of the words in the Companies Act, including Sch. VI, namely, liability,
provision for taxes on income, book profit, net profit, depreciation, amortization
etc. Therefore, it cannot be said that the impugned rules framed under s. 642(1)
constitute an act on the part of the rule making authority, namely, the Central
Government, in excess of its powers under s. 642(1) of the Companies Act. The
impugned rule/notification is valid. It has nexus with the matters entrusted to the
Central Government to be covered by appropriate rules. Therefore, the impugned
rule is valid as it has nexus with statutory functions entrusted to Central
Government which is the rule making authority under the Act.