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TMI Blog2014 (9) TMI 54X X X X Extracts X X X X X X X X Extracts X X X X ..... her such books have been properly maintained in accordance with the Companies Act - Item (c) of the Explanation to section 115JA is not attracted to the provision for bad and doubtful debts. The provision for bad and doubtful debts is made to cover up probable diminution in the value of the assets, i.e., a debt which is an amount receivable by the assessee - Such a provision cannot be said to be a provision for a liability, because even if the debt is not recoverable no liability can be fastened on the assessee - Any provision made towards irrecoverability of a debt cannot be said to be a provision for liability - the provision for bad and doubtful debt is made to cover up the probable diminution in the value of the asset - the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7; 4,67,590/- after adjusting brought forward unabsorbed losses. The A.O. has levied the tax on book profit under Section-115-JA which was at 30%. The A.O., further observed that the assessee made the provision for debts and Non Performing Assets amounting ₹ 1,16,86,187/-. According to the A.O., the same is not covered by clause (c) of Explanation of Sub-section 2 of Section 115-JA of the Income Tax Act, so he made the addition, but the C.I.T.(A) has deleted the same. The Tribunal upholds the same. Being aggrieved, the department has filed the present appeal. With this background, heard Sri Dhananjay Awasthi, learned counsel for the appellant-department who has justified the order passed by the A.O. He submits that BOOK PROFIT ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt to claim as a bad debt. According to the learned counsel, for the purpose of computing income under Section-115-JA, the said amount should be allowed as deduction while computing book profit. He read out Explanation to Section-115-JA which provides the working out the book profit:- (a) the amount of income-tax paid or payable, and the provision therefore; of (b) the amounts carried to any reserves by whatever name called; or (c) the amount or amounts set aside to provisions made for meeting liabilities, other than ascertained liabilities; or (d) the amount by way of provision for losses of subsidary companies; or (e) the amount or amounts of dividends paid or proposed; or (f) the amount or amounts of expenditure relatab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it of item (c) only if the amount (I) is set aside as a provision, (ii) the provision is made for meeting a liability, and (iii) the provision should be for other than an ascertained liability, i.e., it should be for an unascertained liability. Item (c) of the Explanation to section 115JA is not attracted to the provision for bad and doubtful debts. The provision for bad and doubtful debts is made to cover up probable diminution in the value of the assets, i.e., a debt which is an amount receivable by the assessee. Such a provision cannot be said to be a provision for a liability, because even if the debt is not recoverable no liability can be fastened on the assessee. Any provision made towards irrecoverability of a debt cannot be said ..... X X X X Extracts X X X X X X X X Extracts X X X X
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