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TMI Blog2011 (8) TMI 1209X X X X Extracts X X X X X X X X Extracts X X X X ..... there has been a diminution in the value of the assets. In any case no such facts arise in this appeal.In the result, the question is answered in favour of revenue - TAX APPEAL No. 1918 of 2009 - - - Dated:- 17-8-2011 - MR.JUSTICE AKIL KURESHI AND MS JUSTICE SONIA GOKANI MRS MAUNA M BHATT FOR THE APPELLANT MR MANISH J SHAH FOR THE RESPONDENT ORAL ORDER (Per : HONOURABLE MR.JUSTICE AKIL KURESHI) 1.0 The Revenue has filed this appeal against the judgment of the Tribunal dated 21.11.2008 wherein two questions have been framed. 2.0 Vide order dated 02.05.2011, we had discarded question [A]. We had issued Notice for final disposal only with respect to question [B] which reads as under: [B] Whether, on the facts and in the circumstances of the case, the Tribunal was right in law upholding the order of the CIT(A) deleting the addition of ₹ 79,52,852/made by the Assessing Officer while computing the book profit u/s.115JB on account of provision for doubtful debts? 3.0 We were prompted to take up this question at this stage since it was pointed out by learned counsel for the Revenue that subsequent to the decision of the Apex Court in case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ystems and Services Ltd. (supra). The Apex Court was of the opinion that provisions for doubtful debt cannot be said to be a provisions for a liability. Apex Court was of the opinion that for the purpose of Section 115JA, the Assessing Officer can increase a net profit determined as per the profit and loss accounts prepared as per part II and III of Schedule VI to the Companies Act only to the extent permissible under the explanation thereto. The Court was of the opinion that the provisions for bad and doubtful debt would not be covered under explanation to Section 115JA of the Act. 7.0 We may, however, notice that subsequent to the decision of the Apex Court there has been a material change in the statutory provisions. As already noted clause (g) to section 115JA came to be added by way of Finance Act of 2009 with effect from 01.04.1998. It would be necessary to reproduce entire explanation to Section 115JA which reads as under: Explanation. For the purposes of this section, book profit means the net profit as shown in the profit and loss account for the relevant previous year prepared under subsection (2), as increased by( a) the amount of income-tax paid or payable, and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its derived by an industrial undertaking from the business of developing,, maintaining and operating any infrastructure facility [as defined in the Explanation to sub-section (4) of section 80-IA and subject to fulfilling the conditions laid down in that sub-section]; or (vii) the amount of profits of sick industrial company for the assessment year commencing from the assessment year relevant to the previous year in which the said company has become a sick industrial company under sub-section (1) of section 17 of the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986) and ending with the assessment year during which the entire net worth of such company becomes equal to or exceeds the accumulated losses. Explanation.- For the purposes of this clause, net worth shall have the meaning assigned to it in clause (ga) of sub-section (1) of section 3 of the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986); [or] [ (viii) the amount of profits eligible for deduction under section 80HHC, computed under clause (a), (b) or (c) of sub-section (3) or sub-section (3A), as the case may be, of that section, and subject to the conditions specified in sub-s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tems and Services Ltd. (supra) came to the conclusion that for the purpose of Section 115JA the Assessing Officer can increase the net profit only with the extent permissible under the explanation to the said section. With respect to the premature provisions of bad and doubtful debt the Apex Court was of the opinion that the same would not be covered in any of the clauses to the explanation and in particular clause (c) thereof. The Court had observed as under: 10. As stated above, the said Explanation has provided six items, i.e., item Nos.(a) to (f) which if debited to the profit and loss account can be added back to the net profit for computing the book profit. In this case, we are concerned with item No. (c) which refers to the provision for bad and doubtful debts. The provision for bad and doubtful debts can be added back to the net profit only if item (c) stands attracted. Item (c) deals with amount(s) set aside as provision made for meeting liabilities, other than ascertained liabilities. The assessee's case would, therefore, fall within the ambit of item (c) only if the amount is set aside as provision; the provision is made for meeting a liability; and the provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ernate Tax (MAT) on the basis of book profits of a company. As per Explanation 1 after subsection (2), the expression book profit means net profit as shown in the profit and loss account prepared in accordance with the provisions of PartII and PartIII of ScheduleVI to the Companies Act, 1956 as increased or reduced by certain adjustments, as specified in that section. 40.2 A new clause(i) in Explanation 1 after subsection (2) of the said section has been inserted so as to provide that if any provision for diminution in the value of any asset has been debited to the profit and loss account, it shall be added to the net profit as shown in the profit and loss account for the purpose of computation of book profit. 40.3 Similar amendment has also been made in section 115JA of the Incometax Act by way insertion of a new clause (g) in the Explanation after subsection (2) of the said section. 40.4 ApplicabilityThe amendment to section 115JA has been made applicable with retrospective effect from 1st April, 1998 and will accordingly apply in relation to assessment year 199899 and subsequent years. The amendment to section 115JB has been made applicable with retrospective effect f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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