2011 (1) TMI 1443 - AT - Income Tax

Summary

Issues involved: Appeal by Revenue against reduction of net profit for diminution in value of investment for book profit u/s 115JB for assessment year 2006-07.

Summary:
1. The Revenue appealed against the reduction of net profit by &8377; 1,30,53,000/- for diminution in the value of investment for book profit u/s 115JB.
2. The AO noticed the discrepancy in the computation of income under normal provision and book profit u/s 115JB due to the exclusion of the exceptional item related to diminution in value of investment.
3. The assessee explained that the provision for diminution in the value of investment was rightly reduced in the computation of Book Profit as per the Explanation u/s 115JB(2).
4. The AO added back the amount of &8377; 1,30,53,000/- in the book profit citing the retrospective amendment in the Finance Act, 2009 disallowing such deductions.
5. The Ld. CIT(A) disallowed the addition, stating that the amount written back was part of the provision for which no deduction was allowed earlier, hence should not be included in book profit.
6. The Revenue contended that the provision for diminution in the value of investment was not added back under section 115JB, leading to an incorrect computation of book profit.
7. The Ld. Counsel for the Assessee argued that the amount written back was out of the provision created earlier, which was not claimed as a deduction in the book profit for the relevant year.
8. The Tribunal observed that the provision for diminution in the value of investment was not added back in the assessment year 2001-02, and the Ld. CIT(A)'s direction was based on incorrect facts, thus setting aside the order and restoring that of the AO.
9. Consequently, the appeal of the Revenue was allowed, and the original order was upheld.