2010 (11) TMI 1007 - AT - Income Tax

Summary

Issues Involved:
1. Disallowance of bad debts written off.
2. Computation of eligible profit u/s 80IA.
3. Treatment of interest income.
4. Provision for doubtful debts u/s 115JB.
5. Interest under section 234D.
6. Penalty proceedings under section 271(1)(c).
7. Additional grounds related to bad debts and double taxation.

Summary:

1. Disallowance of Bad Debts Written Off:
The Revenue challenged the deletion of disallowance of bad debts written off by the CIT(A). The Tribunal upheld the CIT(A)'s decision, referencing the Supreme Court's ruling in T.R.F. Ltd. vs CIT 323 ITR 397 (SC), which clarified that post-1989, it is sufficient for the assessee to write off the debt as irrecoverable in their accounts without proving it has become bad.

2. Computation of Eligible Profit u/s 80IA:
The Tribunal addressed the issue of whether interest expenditure should be excluded from eligible profit and only the net amount should be considered u/s 80IA. The Tribunal upheld the CIT(A)'s decision to consider only net interest income for exclusion, referencing the Delhi High Court's decision in CIT v Shri Ram Honda Power Equip 289 ITR 475.

3. Treatment of Interest Income:
The Tribunal confirmed that interest income should be assessed under the head 'income from other sources' and not 'business income'. It directed that only the expenditure directly related to earning such interest income should be allowed as a deduction. The Tribunal dismissed the Revenue's appeal on this ground, aligning with the CIT(A)'s decision.

4. Provision for Doubtful Debts u/s 115JB:
The Tribunal addressed the issue of adding the provision for doubtful debts to the book profit for computing tax u/s 115JB. It referenced the Supreme Court's decision in CIT vs. HCL Comnet Systems and Services Ltd. 305 ITR 409 (SC) and subsequent amendments, directing the AO to consider the actual amount of bad debts written off while computing book profits.

5. Interest under Section 234D:
The Tribunal referred to the judgments of the Bombay High Court in CIT vs. Bajaj Hindustan and the Delhi High Court in DIT vs. Jacobs Civil Incorporated, affirming that section 234D is not retrospective. It directed the AO to compute interest u/s 234D only from 1.6.2003.

6. Penalty Proceedings under Section 271(1)(c):
The Tribunal noted that this ground was general and premature, thus rejecting it.

7. Additional Grounds Related to Bad Debts and Double Taxation:
The Tribunal directed the AO to allow the actual amount of bad debts written off while computing profits u/s 115JB, addressing concerns of double taxation.

Conclusion:
The Tribunal partly allowed the Revenue's appeals and the assessee's cross-objections for statistical purposes, directing specific computations and verifications by the AO in line with the discussed judgments and legal provisions.