2015 (7) TMI 493 - AT - Income Tax

Addition of Provision for doubtful debts and the provision for loss of assets required to be added back to the book profit as required under section 115JA - CIT(A) deleted the addition - Held that - CIT(A) had followed the judgment of the Hon ble Supreme Court in the case of HCL Comnet Systems & Services Ltd.(2008 (9) TMI 18 - SUPREME COURT ) to hold that the provision made for bad and doubtful debts cannot be added back in computing book profits u/s 115J of the Act. The Hon ble High Court in the assessee s own case for the assessment year 1999-2000 has only considered the decision of the jurisdictional High Court in the case of CIT vs. Yokogawa India Ltd. reported in (2011 (8) TMI 766 - KARNATAKA HIGH COURT) to come to the conclusion that the Explanation to sec.115J was not attracted to a provision made for bad and doubtful debts. We find that even in the present case, the facts need verification in the light of the judgment of the Hon ble jurisdictional High Court in the assessee s own case for the earlier assessment year. Therefore we set aside the issue to the file of the AO for verification of the accounts and for re-computation. It is further observed that the ground raised by the revenue is that the assessee itself has added the said sum in its computation sheet. According to us this is not relevant as the assessee had added the said amount in the regular computation and not under the computation u/s 115JA of the Act - Decided in favour of revenue for statistical purposes. Addition being provision for exchange fluctuation , while computing book profit - CIT(A) holding that the addition can be made only of the items provided for under the Explanations (a) to (f) to sec.115J of the Act and that the exchange fluctuation is not provided under the Explanation, held that the same cannot be added back - Held that - The assessee had added the said amount in its computation sheet under the regular computation and not in the computation u/s 115J of the Act. We find that the decision of the jurisdictional High Court in the assessee s own case applies to this ground also. Therefore, for the reasons given above, this issue also is set aside to the file of the AO for verification as directed the jurisdictional High Court. - Decided in favour of revenue for statistical purposes. Interest u/s 244A - Held that - Section 244 refers to the liability fastened on the Central Government in case of failure to grant refund within the stipulated time in a case where refund is due to the assessee in pursuance of an order referred to in Section 240. A combined reading of both the provisions makes the position crystal clear that it is any amount which becomes due to the assessee and not necessarily the tax component.See Commissioner of Income Tax versus Goodyear India Limited, 2001 (2) TMI 114 - DELHI High Court . Thus Assessee was entitled to interest in terms of Section 244 of the Act- Decided in favour of assessee.

Summary

Issues Involved:
1. Applicability of provisions of Section 115J for computation of book profits.
2. Addition of provision for bad and doubtful debts to book profits.
3. Addition of provision for exchange fluctuation to book profits.
4. Calculation of interest under Section 244A on refunds.
5. Interest under Section 234D for excess refunds.

Detailed Analysis:

1. Applicability of Provisions of Section 115J for Computation of Book Profits:
The assessee, a public sector bank, accepted the applicability of Section 115J but contended that the recasted profit and loss account should be the basis for computation of book profits, which was accepted by the CIT(A). The AO made various adjustments against this decision, leading to the present appeal.

2. Addition of Provision for Bad and Doubtful Debts to Book Profits:
The Revenue argued that the provision for bad and doubtful debts should be added back to the book profits under Section 115J. The assessee contended that this provision represented a diminution in the value of an asset and relied on the Supreme Court judgment in HCL Comnet Systems and Services Ltd. The CIT(A) ruled in favor of the assessee, stating that the provision for bad and doubtful debts cannot be added back in computing book profits under Section 115J, as there was no amendment to Section 115J similar to Sections 115JA and 115JB. The Tribunal upheld the CIT(A)'s decision but remitted the matter back to the AO for verification in light of the Karnataka High Court's judgment in CIT vs. Yokogawa India Ltd.

3. Addition of Provision for Exchange Fluctuation to Book Profits:
The AO added an amount of Rs. 5 lakhs for exchange fluctuation while computing book profits. The CIT(A) ruled that this addition was not permissible under Section 115J as exchange fluctuation was not provided for in the Explanations to Section 115J. The Tribunal agreed with the CIT(A) and remitted the matter back to the AO for verification.

4. Calculation of Interest under Section 244A on Refunds:
The AO granted interest under Section 244A at Rs. 18,69,18,217/- instead of Rs. 67,19,64,048/-. The CIT(A) directed the AO to rework the interest due by adjusting the refund against the interest first and then against the tax refund due, following the Supreme Court's decision in Sandvik Asia Ltd. The Tribunal found that the CIT(A)'s reliance on Sandvik Asia Ltd. was misplaced and instead referred to the Supreme Court's judgment in CIT vs. HEG Ltd., which clarified that interest under Section 244A includes the interest component. The Tribunal upheld the CIT(A)'s order and dismissed the Revenue's appeal.

5. Interest under Section 234D for Excess Refunds (Assessment Years 2006-07 and 2007-08):
The CIT(A) directed the AO to verify any excess refund granted and levy interest under Section 234D if applicable. The Tribunal found no merit in the Revenue's ground as the CIT(A) had not granted any relief but only directed verification. This ground was also rejected.

Conclusion:
The Tribunal dismissed all the appeals of the Revenue for the assessment years 1990-91, 2004-05 to 2007-08, upholding the CIT(A)'s decisions and remitting certain issues back to the AO for verification.