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2010 (11) TMI 351 - AT - Income TaxDisallowed - Provisions for bad and doubtful and provision for rural advances debts while computing book profit u/s 115JA - Revenue referring to the order of the Supreme Court in the case of M K Venkatachalam vs ITO and another (1958 -TMI - 49638 - SUPREME Court) submitted that order which was proper and valid when it was made can be said to disclose a mistake apparent from record if it becomes erroneous by virtue of subsequent retrospective amendment of law - Since, the Tribunal has directed the Assessing Officer not to add provision for bad and doubtful debts and provision for rural advances for the purpose of sec. 115JA and since there is subsequent amendment by Finance Act, 2009 with retrospective effect from 1.4.1998, therefore, in view of the decision of Hon ble Supreme Court cited supra, the order of the Tribunal contains a mistake apparent from record, which needs to be rectified. He, accordingly, submitted that the order of the Tribunal may be set aside and that of the order of the Assessing Officer be restored - Decided in favour of revenue.
Issues Involved:
1. Disallowance of provisions for bad and doubtful debts while computing book profit under section 115JA. 2. Retrospective amendment of section 115JA by Finance Act, 2009. 3. Validity of the Tribunal's order post-retrospective amendment. 4. Maintainability of Cross Objections against Miscellaneous Applications. Detailed Analysis: 1. Disallowance of Provisions for Bad and Doubtful Debts: The Assessing Officer (AO) disallowed the claim of provisions for bad and doubtful debts while computing book profit under section 115JA, following the decision of the Hon'ble Madras High Court in Beardsel Ltd (244 ITR 256), categorizing it as a provision towards an unascertained liability under clause (c) of Explanation to section 115JA(2). The CIT(A) upheld this action. However, the Tribunal, based on the Special Bench decision in JCIT vs Usha Martine Industries Ltd (104 ITD 249), allowed the assessee's claim. 2. Retrospective Amendment of Section 115JA by Finance Act, 2009: The revenue, in its Miscellaneous Applications, contended that the Tribunal erred in directing the AO not to add provisions for bad and doubtful debts and rural advances for the purposes of section 115JA. This argument was based on the retrospective amendment of section 115JA by the Finance Act, 2009, effective from 1.4.1998, which mandated adding such provisions while computing book profits. 3. Validity of the Tribunal's Order Post-Retrospective Amendment: The Tribunal's order, dated 9.5.2008, was challenged by the revenue on the basis that the retrospective amendment created a mistake apparent from the record. The revenue cited the Supreme Court's decision in M K Venkatachalam vs ITO (34 ITR 143), which held that an order valid when made could disclose a mistake apparent from the record if a subsequent retrospective amendment rendered it erroneous. The Tribunal acknowledged that the retrospective amendment by Finance Act, 2009, required rectification of their previous order. 4. Maintainability of Cross Objections Against Miscellaneous Applications: The assessee filed Cross Objections against the revenue's Miscellaneous Applications, arguing that the Tribunal's order was based on the prevailing law and decisions at the time, such as CIT vs HCL Comet Systems and Services Ltd (305 ITR 409) and CIT vs Max India Ltd (295 ITR 282). However, the Tribunal held that Cross Objections are maintainable only against an appeal, not against a Miscellaneous Application. Consequently, the Cross Objections were dismissed as non-maintainable. Conclusion: The Tribunal allowed the revenue's Miscellaneous Applications, acknowledging the retrospective amendment's impact on the original order. The assessee's Cross Objections were dismissed as non-maintainable. The Tribunal's decision emphasized the necessity to align with the retrospective legislative changes, even if it meant rectifying orders that were valid when originally passed. The final order was pronounced on 19.11.2010.
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