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TMI Blog2010 (4) TMI 865X X X X Extracts X X X X X X X X Extracts X X X X ..... he action of Assessing Officer by observing that as per the amended provisions of section 115JB vide Finance Act, 2009 a new clause (i) has been inserted to provide that the amount set aside as provision for diminution in value of any asset is to be added in the book profit. Against this order of CIT(A), the assessee is in further appeal before us. 3. Shri Pradeep Dinodia, CA appeared on behalf of the assessee company and contended that the assessee company had made a provision of Rs. 102 lakhs in its books of account by debiting to profit and loss account on account of provision for bad and doubtful debts. The provision was made in respect of debts recoverable from the parties to whom sales made in earlier years but amounts had not been received from the parties and on analyzing the financial position, it was considered that amounts may not be recoverable from the respective parties. The provisions had been made on a definite basis and as per well-settled accounting policy and practices. Similar provisions had been made in earlier years also and as and when debts were actually written off in the books of account, same were written off by debiting to the provisions so made. In cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inution in value of long-term investments and such provision is to be reversed as and when there is increase in the value. The clause (i) has to be understood in the context of above requirement of the Companies Act read with Accounting Standard 13. Provisions for bad and doubtful debts is relating to the Accounting Policy for revenue recognition as per Accounting Standard 9. Revenue in respect of sale of goods is required to be recognized as and when property in the goods is transferred to the buyer. In view of above requirement, the company is following the Accounting Policy of recognizing the revenue in respect of sale of its product at the time of dispatch to the customers. Above Accounting Standard further requires that in a case, when there is uncertainty in respect of collect ability of sale price a separate provision to reflect the uncertainty is required to be made and adjustment is not to be made in the amount of revenue originally recorded. Please refer para 6 and para 9.3 of Accounting Standard 9 given in the paper book on pages 9 and 11. Provision for doubtful debts is accordingly, made in view of above accounting standard and same represents reversal of revenue earlie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the profit. In other words, the scope of Explanation is only to make adjustments in respect of such items, which do not represent a charge in determination of profit. Accordingly, adjustment on account of provision for doubtful debts cannot be intended within the scope of clause (i) of Explanation to section 115JB of the Act. (d)As stated hereinabove, provision for doubtful debts, in effect, represents reversal of revenue recognized in earlier years, pursuant to sale of goods. In the year, the sale was made by the appellant company the revenue had been recognized and sale proceeds were included in the book profit and tax thereon had been duly paid. As a result of provision or write off of the debts, the appellant company is entitled to deduction on account of reversal of such revenue. In case provision for doubtful debts is added back to the book profit, the appellant would not get deduction in determination of book profit on account of reversal of the revenue earlier taxed at the stage of sale of the goods. Further, there is no provision in section 115JB of the Act for allowability of deduction in determination of book profit even at the stage when debt is actually written off. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on. By referring to the decision of the Hon'ble Supreme Court in the case of Tata Motors Ltd. v. State of Maharashtra AIR 2004 SC 3618, amendment cannot have retrospective operation. He also relied on the proposition laid down by the Hon'ble Supreme Court in the case of Apollo Tyres Ltd. v. CIT [2002] 255 ITR 273 and submitted that Assessing Officer had no jurisdiction to alter the profit as certified by the statutory auditors. Reliance was also placed on the decision of the Hon'ble Supreme Court in the case of CIT v. HCL Comnet Systems & Services Ltd. [2008] 305 ITR 409 wherein it was held that provision for doubtful debts represented the diminution in the value of assets and the same is not in the nature of an unascertained liability. Accordingly, it was vehemently argued that book profits could not have been enhanced on such provision having been made in respect of ascertained liability. 8. On the other hand, learned CIT-DR Shri Stephen George contended that as per amended provisions of section 115JB by Finance Act, 2009, the Assessing Officer was perfectly justified in adding back the amount of provision for bad debts. 9. We have considered the rival contentions in the light ..... X X X X Extracts X X X X X X X X Extracts X X X X
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