2021 (7) TMI 637 - AT - Income Tax

Rectification u/s 154 - provision for outstanding derivatives contract written back and the provision for doubtful debts was not added back - non disclosure of MAT computation - HELD THAT - Admittedly, the provisions for outstanding derivatives contract written back was reduced from the book profits for asst. year 2008- 09 cannot be allowed for the reason that the appellant was assessed to tax under the regular provisions of the act for assessment year 2008-09. It is also a fact that for assessment year 2008-09, AO made additions for the said provision under the normal provisions of the Act - MAT provisions were not applicable to assessee in the asst. year 2008-09. However the argument of assessee to treat it as a deemed disallowance under MAT for asst. year 2008-09 can t be accepted. No infirmity in the view taken by the Ld.CIT(A) that any reversal of such provision in a subsequent assessment year was to be considered as usual treatment in tax, and the same does not fall within the ambit of overlooking of statutory provisions . This under no circumstances could be deemed as failure to compliance of statutory provisions by the Ld.AO which could be rectified u/s 154. - Decided against assessee.

Issues:
1. Disallowance of provisions for outstanding derivatives contract and doubtful debts for assessment year 2009-10.
2. Applicability of Minimum Alternate Tax (MAT) computation for assessment year 2008-09.
3. Rectification order under section 154 by the Assessing Officer (AO).

Issue 1: Disallowance of provisions for outstanding derivatives contract and doubtful debts for assessment year 2009-10

The appeal was filed against the order passed by the Ld.CIT(A)-14, Bangalore for assessment year 2009-10. The Ld.AO had passed a rectification order disallowing the provision for outstanding derivatives contract written back and the provision for doubtful debts, impacting the MAT computation for the year under consideration. The assessee argued against penalization for non-disclosure of MAT computation for assessment year 2008-09, stating that these provisions related to the previous year. The Ld.CIT(A) rejected the argument, stating that the disallowed provisions under MAT did not pertain to the year under consideration. The assessee, aggrieved by this decision, appealed to the tribunal.

Issue 2: Applicability of Minimum Alternate Tax (MAT) computation for assessment year 2008-09

The Ld.AR contended that the provision for derivative contract was disallowed in the previous assessment year as a contingent liability, but was written back in the current year as it should have been considered as deemed disallowed in the previous year under MAT computation. However, the Ld.Sr.DR argued that since the assessment year 2008-09 was not under consideration, this argument was not valid. The tribunal examined the submissions and records, concluding that the provisions reduced from book profits for the previous year could not be allowed as the appellant was taxed under regular provisions for that year. The tribunal upheld the Ld.CIT(A)'s decision, stating that the reversal of such provisions in a subsequent year was a usual tax treatment and not an oversight of statutory provisions that could be rectified under section 154 of the Act.

Issue 3: Rectification order under section 154 by the Assessing Officer (AO)

The tribunal found no infirmity in the view taken by the Ld.CIT(A) regarding the treatment of provisions in subsequent assessment years and dismissed the grounds raised by the assessee. The appeal was consequently dismissed, and the order was pronounced in open court on 15th July 2021.

This summary provides a detailed analysis of the legal judgment, covering the issues of disallowance of provisions, MAT computation, and rectification order under section 154.

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