2000 (3) TMI 170 - AT - Income Tax

Summary

Issues Involved:
1. Confirmation of prima facie adjustment by the AO u/s 143(1)(a) regarding disallowance of provisions for doubtful debts and wealth-tax while computing book profit u/s 115JA.
2. Denial of credit for income-tax deducted at source amounting to Rs. 12,07,079.

Summary of Judgment:

Issue 1: Prima Facie Adjustment u/s 143(1)(a)
- The assessee, a domestic company engaged in manufacturing and sale of steel wires and ropes, filed a return showing a loss but disclosed book profit for the purpose of s. 115JA.
- The AO processed the return u/s 143(1)(a) and added back Rs. 1,56,00,000 (provision for doubtful debts and advances) and Rs. 1,25,000 (provision for wealth-tax) to the net profit for computing book profit, resulting in a higher tax liability.
- The assessee appealed, arguing that these provisions should not be disallowed as they do not fall under the adjustments specified in the Explanation to s. 115JA(2).
- The CIT(A) upheld the AO's adjustments, but the Tribunal disagreed, stating that:
- Provision for doubtful debts does not fall under cl. (c) of the Explanation to s. 115JA(2) as it pertains to diminution in value of assets, not liabilities.
- Provision for wealth-tax cannot be equated with income-tax and thus does not fall under cl. (a) of the Explanation.
- The Tribunal concluded that the sums of Rs. 1,56,00,000 and Rs. 1,25,000 should not be added back to the net profit for computing book profit u/s 115JA.

Issue 2: Credit for Income-Tax Deducted at Source
- The assessee contended that the AO failed to grant credit for income-tax deducted at source amounting to Rs. 12,07,079.
- The CIT(A) did not address this ground in their order.
- The Tribunal restored this issue to the CIT(A) for reconsideration after providing the assessee an opportunity for a hearing.

Conclusion:
- The appeal of the assessee was allowed, with the Tribunal ruling that the provisions for doubtful debts and wealth-tax should not be added back to the net profit for computing book profit u/s 115JA.
- The issue regarding the credit for income-tax deducted at source was remanded back to the CIT(A) for further consideration.